The federal Government Accountability Office is recommending that the Department of Health and Human Services improve its oversight of the 340B prescription drug discount program.

That program was created by Congress to help safety-net providers obtain discounts on prescription drugs they dispense to low-income patients on an outpatient basis.  Those discounts are provided by pharmaceutical companies and not paid for with taxpayer money.

The 340B program has been controversial in recent years, and in response to a request from Congress for the GAO to look into the contract pharmacies that operate the 340B programs for many safety-net providers, the GAO performed an examination of the program.

Its review identified several weaknesses in the manner that HHS’s Health Resources and Services Administration oversees the program.

  • HRSA audits do not fully assess compliance with the 340B Program prohibition on duplicate discounts for drugs prescribed to Medicaid beneficiaries. Specifically, manufacturers cannot be required to provide both the 340B discount and a rebate through the Medicaid Drug Rebate Program. However, HRSA only assesses the potential for duplicate discounts in Medicaid fee-for-service and not Medicaid managed care. As a result, it cannot ensure compliance with this requirement for the majority of Medicaid prescriptions, which occur under managed care.
  • HRSA requires covered entities that have noncompliance issues identified during an audit to assess the full extent of noncompliance. However, because HRSA does not require all the covered entities to explain the methodology they used for determining the extent of the noncompliance, it does not know the scope of the assessments and whether they are effective at identifying the full extent of noncompliance.
  • HRSA does not require all covered entities to provide evidence that they have taken corrective action and are in compliance with program requirements prior to closing the audit. Instead, HRSA generally relies on each covered entity to self-attest that all audit findings have been addressed and that the entity came into compliance with 340B Program requirements.

To address these concerns, the GAO recommends that the HRSA administrator:

  • require covered entities to register contract pharmacies for each site of the entity for which a contract exists
  • issue guidance to covered entities on the prevention of duplicate discounts under Medicaid managed care, working with CMS as HRSA deems necessary to coordinate with guidance provided to state Medicaid programs
  • incorporate an assessment of covered entities’ compliance with the prohibition on duplicate discounts, as it relates to Medicaid managed care claims, into its audit process after guidance has been issued and ensure that identified violations are rectified by the entities
  • issue guidance on the length of time covered entities must look back following an audit to identify the full scope of noncompliance identified during the audit
  • require all covered entities to specify their methodology for identifying the full scope of noncompliance identified during the audit as part of their corrective action plans, and incorporate reviews of the methodology into their audit process to ensure that entities are adequately assessing the full scope of noncompliance
  • require all covered entities to provide evidence that their corrective action plans have been successfully implemented prior to closing audits, including documentation of the results of the entities’ assessments of the full scope of noncompliance identified during each audit. The Administrator of HRSA should provide more specific guidance to covered entities regarding contract pharmacy oversight, including the scope and frequency of such oversight

Go here to see highlights from the report and here to see Drug Discount Program: Federal Oversight of Compliance at 340B Contract Pharmacies Needs Improvement, the full GAO report.