340B Drug

Why a Recent Court Ruling Jeopardizes the 340B Drug Program


A recent court ruling involving the government’s 340B Drug Pricing Program is considered a victory for program participants, also known as covered entities. But it could be a short-lived victory. Why? Because certain portions of the ruling could actually put the program in jeopardy. It is not beyond the realm of possibility that Congress will choose to cancel 340B outright.

The case in question was decided by the U.S. District Court of South Carolina in early November. That case hinged on the definition of a ‘patient’ under the original 340B statute. In its ruling, the court determined that federal regulators cannot apply a narrow definition of a patient give such a definition does not comport with the statute’s language. The end result is that covered entities now have the freedom to apply a much broader definition, thereby giving them access to a higher volume of 340B drug purchases.

A Comparatively Minor Issue

In terms of how the ruling might jeopardize the program, restricting how government regulators can define a patient is a minor issue. A bigger issue is the fact that the court called into question the Health Resources and Services Administration’s (HRSA’s) legal authority to administer 340B.

The ruling went so far as to suggest that HRSA needs to at least take a second look at its administrative policies and the rules by which the program is governed. When you combine that language with the suggestion that HRSA lacks legal authority, you open the door to the possibility that there is no mechanism in place by which to continue operating 340B.

Given that 340B is already being scrutinized due to accusations of program abuse, it seems reasonable that Congress will have to address the matter one way or another. Congressional investigations might ultimately reveal that the program is too far gone to save. At this point, all we can do is wait while Congress does its thing.

How the Program Works

While 340B administration can be convoluted and difficult, the basic premise of the program is fairly simple. Congress created 340B in 1992 to provide indirect financial assistance to disproportionate care hospitals. These are hospitals that provide a disproportionate amount of services to low-income communities. The hospitals already receive federal funding for that purpose. 340B was designed to help them stretch the funding further by reducing what they pay for certain prescription drugs.

Covered entities often rely on the services of 340B drug pricing program consultants, like Florida-based Ravin Consultants, to maintain compliance. They rely on 340B experts to help them make sure they are crossing all the T’s and dotting all of the I’s.

Meanwhile, any pharmaceutical company that wants to sell drugs to healthcare providers who participate in Medicare or Medicaid must also participate in 340B. They are required to sell covered drugs and discounts at high as 50%. They must offer the discounts to all covered entities and their contract pharmacies.

An Unclear Future

The 340B Drug Pricing Program has been controversial since the very beginning. In recent years, however, it has come under additional scrutiny due to accusations of abuse. Now the program’s future is unclear. Thanks to the recent court ruling and its implied undercutting of HRSA authority, 340B could be in real trouble.

I would not be surprised to see the program shut down within the next year or two. I would imagine that covered entities do not want to see that happen. Ultimately, the decision rests with Congress. If the HRSA truly lacks the authority to regulate 340B, Congress will have to do something to remedy the situation.

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