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Azar Proposes Significant Changes to 340B Drug Discount Program

The 340B drug discount program was originally created to provide affordable and comprehensive drug services to indigent patients. Manufacturers agree to provide prescription drugs to covered entities at significantly reduced prices, who can then offer the discounted prescription drugs to eligible patients. Covered entities include: HRSA-supported health centers, Ryan White clinics, State AIDS Drug Assistance programs, Medicare/Medicaid Disproportionate Share Hospitals, Children’s Hospitals, and other safety net providers.

The Department of Health and Human Service (HHS) Secretary Alex Azar is concerned about the 340B program; he suggests that there has been abuse of the program by covered entities.  Azar stated that “[t]he current nature of 340B is such that it is quite possible for the program’s benefits to be diverted to unintended purposes, unrelated to supporting care for low-income patients.” In fact, many 340B hospitals are able to receive drug discounts for all of their patients, even though there are only a small amount of uninsured and underserved patients at the hospital. A report by the OIG found that a majority of 340B entities do not even offer the reduced prices to uninsured patients, allowing them to profit off the program.

In a meeting with lawmakers, Azar proposed to cut the discount to 20% of the list price, which is significantly lower than the typical 40-60% discount. This effort by HHS coincides with the Trump administration’s goal to lower prescription drug prices.

Last week, the House Energy and Commerce Committee held a hearing where a possible halt on the program’s ongoing expansion was discussed, and potential limits on how many people can qualify for the discounts offered to the hospitals were also revealed. A proposal by Representative Chris Collins (R-N.Y.) would change the current “patient definition” to only allow the drug discount for uninsured patients.

Currently the Health Resources and Services Administration (“HRSA”) oversees the 340B program, but HHS is seeking to obtain broader regulatory authority over 340B.  The reason HHS wants to take regulatory authority from HRSA is because of a recent Government Accountability Office (“GAO”) report criticized HRSA’s audits for not fully identifying duplicate 340B and Medicaid discounts and not revealing the full extent of noncompliance within the program.

Though none of these changes to the 340B drug discount program have been implemented, Wachler & Associates will continue to post updates on it and other current healthcare topics.  If you or your healthcare entity has any questions pertaining to healthcare compliance, please contact an experienced healthcare attorney at (248) 544-0888, or via email at You may also subscribe to our health law blog by adding your email at the top right of this page.

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