Drugmakers, hospitals spar over new 340B drug discount 'dispute resolution' process

Hospitals and pharmaceutical manufacturers are at odds over revisions to the 340B drug discount program, announced by the Biden administration last week.

The final rule, which will take effect on June 18 after a 60-day comment period, aims to make dispute resolution more accessible and efficient, according to the Health Resources and Services Administration, which oversees the program. Along with lowering barriers to entering the process, the rule requires parties to make a good-faith effort to resolve disputes before bringing them to arbiters and creates an appeals process if either party doesn’t like the result.

The 340B drug discount program generates revenue for hospitals, clinics and pharmacies by requiring drugmakers to provide discounts on medications. The program was created more than 30 years ago to support hospitals caring for a disproportionate number of low-income populations by requiring drugmakers to give those providers discounts on outpatient drugs. These discounts can be as much as 20% to 50% off the list price. As a result, pharmaceutical companies strongly oppose the program for cutting into their bottom lines, while safety-net hospitals say 340B is a financial lifeline for their cash-strapped facilities.

“The administration’s final rule for the 340B drug pricing program administrative dispute resolution (ADR) process is an important step in ensuring the integrity of the 340B program,” said Chad Golder, chief counsel for the American Hospital Association. “The final rule contains several important process improvements, including a clear timeline for when ADR decisions must be made and an opportunity for reconsideration when parties are dissatisfied with the initial ADR decision.

“The AHA is particularly pleased that the final rule makes clear that an overcharge claim includes instances where a drug company has limited a hospital’s ability to purchase 340B drugs at or below the 340B ceiling price. This rule will help hold drug companies accountable for their rampant abuses of the 340B program and the patients it serves.”

340B Health, which represents 1,500 hospitals participating in the program, said it was “particularly encouraged” that the final rule allows hospitals to bring to the panel disputes over drug companies limiting their ability to purchase drugs at the 340B price. It also noted that regulators rejected a proposal that would have prevented hospitals from bringing claims similar to those pending in federal court, because a number of court cases are pending after about 20 drugmakers halted 340B discounts to providers that use community and specialty pharmacies.

Drugmakers, in turn, have accused hospitals of not being responsible stewards of the program’s funds, especially as 340B continues to grow. “Frustratingly, the administration chose not to consider issues we raised in our comments, exacerbating ongoing program integrity issues,” PhRMA spokesperson Nicole Longo said. She called the rule “flawed.”

Related: 340B drug discount program under scrutiny: Are hospitals using funds for other purposes?

Research on the program’s effectiveness is mixed, with some studies finding that hospitals use revenue from the program to expand health-care services for low-income patients and subsidize uncompensated care. Others have used it for purposes unrelated to patient care, such as acquiring physician practices. Similarly, audits of covered entities have found many providers aren’t complying with 340B requirements, such as not reselling discounted drugs.