Impact of the 340B Discount Drug Program\u27s Proposed Mega-Guidance

There is a current policy debate surrounding the 340B program, a drug discount program that lowers drug costs for medical providers that disproportionately care for low-income patients—at no cost to the taxpayer. The two main stakeholders, the pharmaceutical industry and covered entities such as disproportionate share hospitals that provide care to the indigent and the most vulnerable patient population, are at odds on whether changes need to be made to the program. In 2015, proposed changes to the 340B program were published, but never finalized. A gap exists in our understanding of what this little known program is, how it is utilized, and what impact the proposed legislative changes (“Mega-Guidance”) would have on public financing. The 340B program is being primarily utilized by Disproportionate Share Hospitals (DSH) to generate income that allows them to provide millions in unfunded charity care and to provide additional services to underfunded patient populations, many in areas of the country where these healthcare services would not otherwise be offered. However, there is no specific data linking that income directly to the patient. Pharmaceutical companies’ data shows a significant increase in the 340B program’s participation with an overall decrease in the amount of charity care. While governmental oversight is lacking and there is no requirement regarding how the income is spent, implementing the proposed Mega-Guidance as written could have a detrimental fiscal impact that would ultimately impact the programs and services the DSHs fund with the 340B program’s generated income. Most significantly, the Mega-Guidance proposes to prohibit the use of 340B drugs for inmate care. This would prevent UTMB, a DSH that utilizes the 340B program to provide pharmaceutical drugs to inmates in Texas, from utilizing the 340B program for inmates. This would cost the State of Texas and ultimately the taxpayers an additional $95 million dollars a year. The goal of this study is to develop a deeper understanding of the 340B program by investigating the following key questions: What is the purpose of the 340B program and how is the program operationalized to fulfill its purpose? What is the proposed Mega-Guidance and stakeholder arguments for and/or against the implementation of the Mega-Guidance? What is the financial impact of implementation of the proposed Mega-Guidance to the Texas Correctional Managed Care pharmaceutical costs and potential impact on Texas public health care financing