GAO Recommends Increased Oversight of 340B Program

February 18, 2020

The Government Accountability Office (GAO) recently released two reports on the need for increased oversight of the 340B Drug Pricing Program. Specifically, GAO focused on ensuring that participating hospitals meet eligibility requirements and how the program intersects with the Medicaid Drug Rebate Program. The reports follow efforts by the Trump Administration and Congress in recent years to improve the oversight and integrity of the 340B program.

GAO’s December report on eligibility requirements noted that weaknesses in oversight allow some hospitals that do not meet statutory eligibility requirements to participate in the 340B program. According to GAO, about two-thirds of the 1,700 hospitals participating in the 340B program are nongovernmental hospitals that qualify because they have contracts with state or local governments to provide services to the 340B-specified low-income population. GAO noted that while most contracts require the hospitals to provide health care to low-income individuals, few of them include details about these requirements, such as the amount and type of care or the definition of “low-income.” GAO also noted that the Health Resources and Services Administration (HRSA), which administers the 340B program, has not implemented oversight processes to ensure that participating hospitals meet eligibility requirements.

GAO’s recommendations for correcting weaknesses in HRSA’s contract review processes include implementing processes to verify and review the contracts and improve auditing practices. In written comments on a draft of the report, the Department of Health and Human Services (HHS) generally supported the recommendations, but not the use of a process to verify that all nongovernmental hospitals have contracts, as HRSA lacks the necessary resources. HHS also noted that HRSA is now making changes that align with GAO’s recommendations.

GAO’s January report found that HHS’s limited oversight of the 340B and Medicaid Drug Rebate Programs may increase the risk of duplicate discounts between the two programs. Federal law prohibits such discounts, and state Medicaid programs must have information on when covered entities dispense 340B drugs to Medicaid beneficiaries so they can be excluded from Medicaid rebate requests. GAO also noted that when duplicate discounts are found in Medicaid managed care claims, HRSA does not require the covered entities to address or repay them. GAO determined that HHS cannot ensure that states and covered entities comply with the prohibition, given HRSA’s lack of Federal oversight.

GAO made three recommendations to improve oversight: instruct the Centers for Medicare & Medicaid Services (CMS) to ensure that state Medicaid programs have written policies and procedures that prevent duplicate discounts and forgone rebates, instruct HRSA to incorporate covered entities’ compliance with state policies into its audits, and instruct HRSA to require covered entities to work with manufacturers on repayment of identified duplicate discounts in managed care. In its written comments, HHS supported the recommendation to CMS but not the two to HRSA, noting that HRSA is not authorized to take such steps.

GNYHA will continue to advocate for the protection of the 340B program and the critical funds that it provides safety net hospitals.