[co-author: Melissa Gertler]*
On October 2, 2018, the CEOs of more than 700 hospitals and health systems representing healthcare providers in all fifty states sent a letter to Congress (the “Letter”) in a collective effort to protect the 340B Drug Pricing Program (the “340B Program”). The CEOs expressed their view that recent governmental actions have reduced the reach of this vitally important program and that recently proposed legislation will undermine decades of bipartisan work to preserve access to prescription medication for the nation’s most vulnerable citizens.
The 340B Program requires pharmaceutical manufacturers to provide prescription drugs at a discounted rate to certain healthcare providers that serve low-income and rural populations, such as disproportionate share hospitals, health centers, and other providers that offer medical services to a disproportionate number of low-income and rural patients.
As we previously discussed in January, the discount rates for the 340B program were significantly reduced when a rule promulgated by the Centers for Medicare & Medicaid Services (“CMS”) went into effect on January 1, 2018. Additionally, in December 2017 and January 2018, Congress proposed legislation that will prevent most new hospitals from joining the program and will increase program oversight. The House of Representatives introduced the “340B Protecting Access for the Underserved and Safety-net Entities Act” or the “340B PAUSE Act” (H.R.4710), and the Senate introduced the “Helping Ensure Low-income Patients have Access to Care and Treatment” or the “HELP Act” (S. 2312). Both proposed bills seek to establish a two-year moratorium on the registration of certain new 340B hospitals and health entities.
Further, the proposed legislation would create new data reporting requirements. Participating providers would be required to submit written reports to the Department of Health and Human Services (“HHS”), which contain information such as the number and type of patients who receive drugs under the program and the amount of gross reimbursement received by the participating provider. A redacted version of the data for each provider would be made publicly available on the HHS website. To increase government oversight, the HHS Office of the Inspector General and the Government Accountability Office would be required to submit reports to Congress about the providers participating in the 340B Program.
Healthcare Providers Push Back
Healthcare providers continue to fight back against the Trump Administration’s changes to the 340B Program. The Letter, which was signed by CEOs representing a wide range of 340B Program participants from across the United States, argues that recent attempts to cut back on the 340B Program would only make prescription drug prices higher and would weaken the ability of nonprofit hospitals to serve patients who have nowhere else to turn for medical services.
The Letter explains that for more than 25 years, the 340B Program has reduced the cost of prescription drugs for thousands of hospitals, clinics, and health centers that treat the neediest Americans. These savings allow participating providers to stretch their resources to serve more patients and to offer more services, including obstetrics, trauma care, opioid addiction treatment and HIV/AIDS care.
The CEOs also claim that the savings created by the 340B Program could be the difference between hospitals remaining open or shutting down in some rural communities. The Letter states that in 2015, hospitals that participated in the 340B Program provided $26 billion in uncompensated and unreimbursed care to low-income and rural patients – amounting to 60 percent of all such care provided in the United States, despite the participating hospitals accounting for only 38 percent of all acute care hospitals.
At this point, the future of the 340B Program is unclear. Currently, the PAUSE Act and the HELP Act are in committee, and there is no indication when, or if, either bill will make it out of committee for a full vote. While healthcare providers continue to push back against further changes to the 340B Program, it is too early to tell what effect, if any, the Letter will have at stopping future cuts to the 340B Program.
*Melissa Gertler is a law clerk in Sheppard Mullin’s Century City office.
 Letter, dated October 2, 2018, from Scot Mitchell, et. al., https://www.340bhealth.org/files/CEO_Letter_FINAL.pdf.
 Tina Reed, “Banner Health, Ascension executives join hundreds of hospital CEOs defending 340B program,” (Oct. 2, 2018), https://www.fiercehealthcare.com/hospitals-health-systems/banner-health-ascension-executives-join-hundreds-hospital-ceos-defending.
 The “340B Protecting Access for the Underserved and Safety-net Entities Act,” H. R. 4710 (Dec. 21, 2017); The “Helping Ensure Low-income Patients have Access to Care and Treatment Act,” S. 2312, (Jan. 16, 2018).