The 340B Drug Discount Program is a federal government program created in 1992, following the enactment of the Medicaid Drug Rebate Program, which allows participating drug manufacturers to give certain covered health care entities access to discounted prices on outpatient drugs. The HRSA (part of the Department of Health and Human Services) oversees the program. Covered entities include hospitals and specified federal grantees, such as Planned Parenthood.
According to the Guttmacher Institute’s 2010 report on the 340B Program:
The law requires manufacturers to sell their drugs to a range of safety-net providers, including Title X–supported family planning centers and community health centers, below a certain price (called a price ceiling) calculated for each drug each fiscal quarter using a statutory formula based on private-sector prices. The companies are permitted to set their safety-net prices below that ceiling, if they so choose. Congress designed 340B to generate discounts that are equivalent to the rebates on drugs provided to state Medicaid programs, also set under federal law.
Program participants were initially allowed to self-police regarding program compliance. But that proved to be a mistake.
In September 2011, a Government Accountability Office (GAO) report found that HRSA’s oversight of the 340B program was inadequate to provide “reasonable assurance that covered entities and drug manufacturers are in compliance with program requirements.” The GAO recommended that HRSA conduct selective audits of covered entities to provide additional program oversight, monitor for program violations, and prevent diversion and duplicate discounts.
A 2015 HRSA audit found Planned Parenthood of Illinois (PPIL) non-compliant regarding the 340B Drug Pricing Program for the following:
- Incorrect 340B database record – Registered contract pharmacy without written contract in place.
- Duplicate Discounts – Inaccurate or incomplete information on the Medicaid Exclusion File.
According to a policy regarding the audits:
Federal law prohibits requiring manufacturers to pay discounts or rebates under both the 340B Program and the Medicaid Drug Rebate Program (duplicate discounts). And it prohibits resale of 340B drugs to a person who is not a patient of the entity (diversion). HRSA and manufacturers have had the authority to audit covered entities regarding their compliance with diversion of drugs and duplicate discounts since the inception of the 340B Program.
A public letter to manufacturers published online states that Planned Parenthood was to “begin a dialogue on a method for repayment to affected manufacturers.”
The letter also stated in part, “PPIL listed incorrect or incomplete billing information on the 340B Medicaid Exclusion File. This may have resulted in duplicate discounts as prohibited by section 340B(a)(5)(A) of the PHSA.”
The audit closed on February 3, 2017.
Similar violations occurred at Planned Parenthood Hudson Peconic, Inc. (PPHP) in 2013. Audit findings included:
- Incorrect 340B database record – Closed outpatient facility remained registered on the 340B database.
- Duplicate Discounts – Entity was billing Medicaid contrary to information included in the Medicaid Exclusion File.
According to the GAO:
Covered entities also are prohibited from subjecting manufacturers to duplicate discounts whereby drugs prescribed to Medicaid patients are subject to both the 340B price and a rebate through the Medicaid Drug Rebate Program…. Covered entities that decide to use 340B drugs for Medicaid patients must notify HRSA so that it can coordinate with state Medicaid agencies for billing purposes.
- PPHP-Mount Vernon
- PPHP-White Plains
- PPHP-New Rochelle
- PPHP-Spring Valley
- PPHP-West Islip
The letter also states that Planned Parenthood Hudson Peconic “accept[ed] the audit findings, and is… investigating further to determine whether any amounts are owed to manufacturers,” and if so, “will notify all affected manufacturers to offer repayment.” Apparently, the duplicate discounts happened “because PPHP’s election on the OPA database incorrectly reflected that PPHP did not use 340B drugs for its Medicaid patients….”
The audit was eventually closed on February 2, 2016.