Thursday, December 15, 2005
Mr. Chairman and Members of the Subcommittee:
History of the Program
The 340B drug discount prices, commonly referred to as ceiling prices, are based on Average Manufacturers Price and Medicaid Drug Rebates. Pharmaceutical companies that participate in the Medicaid program must sign a Pharmaceutical Pricing Agreement that obligates them to participate in the 340B program. Under the 340B program, the selling price may be lower than the ceiling price, but never greater.
HRSA Oversight and Administration
The PSSC, operated under a contract with the American Pharmacists Association, provides expert technical assistance to covered entities that want to access the 340B program and to improve their pharmacy programs.
The new Prime Vendor Program, which operates under a competitively awarded agreement with Health Purchasing Partners International, became effective in September 2004, and has three primary functions to increase value for participating covered entities: 1) negotiate drug prices below the statutorily required 340B ceiling price; 2) enter into favorable distribution agreements with multiple drug wholesalers; and 3) provide discounts on other value-added pharmacy products and services. As of November 2005, approximately 2,000 covered entities participate in the Prime Vendor Program and represent over $1.7 billion in combined purchases.
Currently, there are a total of over 12,000 participating 340B covered entities. As of October 2005, approximately 650 drug manufacturers have signed Pharmaceutical Pricing Agreements.
The most important benefit of participation in the 340B Drug Pricing Program is the significant savings on pharmaceuticals estimated at 20% to 50% below list price or average wholesale price. We estimate annual 340B purchasing volume of $4 billion, which represents about 1.7% of the $230 billion a year pharmaceutical market. We estimate that participating entities can save $1.5 billion to $2 billion annually.
In June 2001, the Alternative Methods Demonstrations Projects were initiated to increase access to affordable drugs for uninsured and underinsured patients of covered entities, particularly in rural areas. These projects involve one or a combination of the following three activities: 1) a network of covered entities; 2) multiple contracted pharmacy services sites; or 3) a contracted pharmacy to supplement in-house pharmacy services. As of October, there were 11 approved projects.
2003 OIG Report
In September 2004, HRSA sent letters to these companies requesting corrective action plans for repayment of the OIG stated overcharges. To date, we have not received refunds from the companies. We are currently working with CMS to resolve the issues raised by the OIG.
2004 OIG Report
2005 OIG Report
HRSA and CMS recently signed an Intra-Agency Agreement (the Agreement). In accordance with the Agreement, we now receive the AMP and the Medicaid Unit Rebate data from CMS to calculate the 340B ceiling prices. In addition, we have increased outreach and technical assistance to covered entities. Currently, we are seeking voluntary data submissions for the Prime Vendor secure Web site; monitoring compliance with 340B legal and regulatory requirements; and working with the OIG and DOJ in instances of drug diversion. These cases of drug diversion have led us to examine the need to revise program guidelines to more clearly define the patient-provider relationship under the 340B Program. Lastly, we plan to compare pharmaceutical company ceiling price data with market place selling price data on a quarterly basis and follow-up with the respective drug company or wholesaler to resolve discrepancies. Unresolved discrepancies may be referred to the OIG and DOJ for assistance.
With over twelve thousand participating covered entities, the 340B Drug Pricing Program plays an important role in improving the health of the uninsured and underinsured. The 340B Program ensures that federally funded grantees and other safety net health care providers purchase prescription medication at significantly reduced prices. In so doing, this program expands access to affordable pharmaceutical drugs, improves health outcomes and eliminates health disparities among the nations most vulnerable.
Thank you for the opportunity to report on the oversight and administration of the 340B Drug Pricing Program. We look forward to working with the Committee to ensure that the 340B Drug Pricing Program continues to be a valuable Federal resource.
Last Revised: December 16, 2005