Case 13 340B Drug Pricing Program Oversight
Order ID 53563633773 Type Essay Writer Level Masters Style APA Sources/References 4 Perfect Number of Pages to Order 5-10 Pages Description/Paper Instructions
Case 13 340B Drug Pricing Program Oversight
Section 602 of the Veterans Health Care Act of 1992 was titled “Limitations on Prices of Drugs Purchased by Certain Clinics and Hospitals.” It amended the Public Health Services Act by adding a new section, Section 340B, to that act. Section 602 of the Veterans Health Care Actread in part:
Part D of title III of the Public Health Service Act is amended by adding the following subpart: “SUBPART VII – DRUG PRICINGAGREEMENTS” LIMITATION ON PRICES OF DRUGS PURHASED BY COVERED ENTITIES “Sec. 340B (a) Requirements for Agreement withSecretary – “(1) In general. The Secretary shall enter into an agreement with each manufacturer of covered drugs under which theamount required to be paid … to the manufacturer for covered drugs … does not exceed an amount equal to the average manufacturerprice for the drug under title XIX of the Social Security Act in the preceding quarter, reduced by the rebate percentage described inparagraph (2). “Rebate percentage defined. – (A) In general. For a covered outpatient drug … the ‘rebate percentage’ is the amount equalto – “(i) the average total rebate required under Section 1927(c) of the Social Security Act … for a unit of the dosage form and strengthinvolved during the preceding quarter divided by “(ii) the average manufacturer price for such a unit of the drug during such quarter….”
Section 340B applied Medicaid drug discounts to drugs purchased for clinics that served many outpatients who were not eligible forMedicaid at qualified safety-net institutions. For the most part, eligible clinics were associated with hospitals receiving disproportionateshare payments under Medicare, pediatric hospitals, and community health centers. Also included were specialized clinics and projects forHIV/AIDS, hemophilia, black lung, tuberculosis, and family planning, as well as those serving Native Americans and Native Hawaiians.Hospitals were required to be governmental or nonprofit with a contractual commitment to provide services supported by governments,have a disproportionate share percentage greater than 11.75, and not obtain the covered drugs through a group purchasing agreement. Thedrugs had to be used for patients of the covered entity and could not be resold.
A key provision of Section 340B read “(10) No prohibition on larger discount. Nothing in this subsection shall prohibit a manufacturer fromcharging a price for a drug that is lower than the maximum price that may be charged under paragraph (1).” The Patient Protection andAffordable Care Act (ACA or PPACA) increased the 340B discount to 13% on generic drugs and 23.1% on branded drugs. Specific discountshave been reported to range from 15–60% on prescription drugs. The law prohibits getting both a state Medicaid rebate and a 340Bdiscount on a drug.
BACKGROUND
In the 1980s, Congress established a discount drug purchasing program for the Veterans Administration. In 1990, it extended this discountprogram to Medicaid purchases on behalf of low-income and uninsured enrollees under the Medicaid Drug Rebate Program. Soon it becameclear that this law conflicted with another requirement that state Medicaid programs receive discounts matching the lowest prices offeredin non-Medicaid markets. Congress moved to remedy this problem. Otherwise, the participating pharmaceutical and biotechnologycompanies would choose to stop offering discounts across the board.
The 340B program is administered by the Office of Pharmacy Affairs within Health Resources and Services Administration (HRSA) of theDepartment of Health and Human Service. This office is tasked with auditing compliance with program requirements, especially theeligibility of covered entities, and program integrity concerning diversions and duplicate discounts and manufacturer pricing. However, thisoffice has a very limited staff, and the number of institutions taking advantage of the program has been growing rapidly. HRSA also supportsa number of other programs, such as the Ryan White HIV/AIDS program and community and rural health centers that are covered entitiesfor 340B drug discounts.
The HRSA website describes the intent of 340B in a listing of Frequently Asked Questions to be “to permit covered entities to stretch scarceFederal resources as far as possible, reaching more eligible patients and providing more comprehensive services” [HR Rep. No. 102-384384(II) at 12 (1992)].
Although there are limitations on billings to Medicaid patients, there are no constraints on billings to non-Medicaid patients.
The ACA freed up hospitals to choose among discount sources such as 340B and their group purchasing organizations. The ACA also made anumber of provisions to strengthen program integrity.
Section 1703 of the ACA called for a Government Accounting Office (GAO) study of the program:
… that examines whether those individuals served by the covered entities under the program under section 340B of the Public HealthService Act (42 U.S.C. 256b) (referred to in this section as the “340B program”) are receiving optimal health care services.
RUBRIC
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