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Policy Points:
Context: The 1992 340B Drug Pricing Program (“340B”) started as a narrowly focused program aimed at Public Health Service Act–funded clinics and public hospitals. Today 340B includes two-thirds of all nonprofit hospitals in the United States and accounts for more than $80 billion in discounted drug purchases. Statutory language authorizing 340B is sparse, and attempts to strengthen or cut the program have been stymied by lack of clarity on Congress’s original intentions. The object of this study was to clarify Congress’s original intentions for 340B.
Methods: Our qualitative analysis was informed by the collection and analysis of two sources: (1) 175 internal primary source documents and (2) 19 structured interviews conducted with 18 key informants with respect to the creation of 340B.
Findings: Congress had two intentions in establishing 340B in 1992. The first was to address an unintended consequence of the Medicaid Drug Rebate Program (MDRP), which raised costs on safety-net clinics that received significant discounts on drugs prior to the rebate program. Such core safety-net clinics operate on fixed budgets heavily dependent on federal grants, which also require them to provide free and discounted care to patients regardless of their ability to pay. The purpose of 340B was to exempt these clinics from the best price provision of the MDRP. The second was to establish minimum discounts for drug prices for core safety-net providers. While public hospitals were added because of their safety-net mission, the disproportionate share hospital eligibility criterion were included to qualify two specific hospitals to secure bipartisan support.
Conclusions: Congress’s original intention for 340B was to enable core safety-net providers to continue to provide drugs to patients regardless of costs in the face of historic drug price increases set off by the MDRP. The current scope of the program exceeds Congress’s original intent.
