August 142017340B Use of Funds: A Call for Increased Transparency

There have been several developments in 2017 regarding 340B programs

   Jamila Seibel, PharmD, Consultant
   Russ Barron, Consultant 

At 340B Health’s annual Summer Coalition conference, a common theme appeared to emerge from both speakers and attendees alike in Washington DC: use of 340B funds. Over the last several months, a call for increased transparency of funds has surfaced in several areas of legislation:

  • The Trump administration’s 2018 Budget request: The budget proposal seeks to “update the regulatory authority in the 340B Program to increase transparency and improve program integrity.” (click here to read about the 2018 Budget Request)
  • A letter initiated by the Energy and Commerce Committee: describes concern over the “rapid growth” of the 340B program and maintains that “given the program’s ability to generate revenue, HRSA has a vested interest in ensuring that those funds are used to benefit patients”. (click here to see full letter)

Captain Krista Pedley, Director at the Office of Pharmacy Affairs, echoed this sentiment during her address to conference attendees. She described HRSA’s intent to seek additional regulatory authority, and that HHS will be working with congress on improving program integrity, and ensuring that the 340B program benefits underserved populations.

Under the current statute, entities are not required to disclose or track individual dollars saved through participation in the 340B program. Furthermore, because the 340B statute does not restrict how covered entities can use the additional revenue, 340B savings may be applied in a multitude of ways within an organization. In a 2011 Government Accountability Office (GAO) survey, covered entities that generated revenue through the 340B program stated that the revenue is used it to serve more patients and provide additional services, such as additional locations, patient education programs, and case management(i). Similarly, in a member survey conducted by The Safety Net Hospitals for Pharmaceutical Access (SNHPA), the organization now known as 340B Health, hospitals stated that revenue generated through the program was used for a variety of purposes, such as reducing the price of drugs paid by patients, supporting medication therapy management programs, providing uncompensated care, and maintaining broader hospital operations(ii). Although there are no requirements under the 340B statute for how 340B revenue can be used, covered entities that are federal grantees (such as federally qualified health centers) may be required to use 340B revenue in ways that are consistent with their grant requirements, and monitored through A-133 audits(iii).

The Alinea Group strongly encourages entities to utilize 340B dollars to support the intent of the program, which was designed to “enable covered entities to stretch scarce Federal resources as far as possible, reaching more eligible patients and providing more comprehensive services”(iv). Entities should include a statement within their 340B policies and procedures that asserts the fact that use of 340B funds is in accordance with program intent. It is unclear to what extent the proposed call for use of funds transparency will be implemented in the future. The proposed Omnibus Guidance, now retracted, did not address changes to requirements for use of funds, accountability tracking, or savings monitoring, so the direction legislative changes may take in this matter is purely speculation.

The current trend of increased scrutiny surrounding the 340B program is unlikely to subside in the near future. There appears to be legislative support for greater 340B program oversight, and HRSA is likely to capitalize on the opportunity to step up enforcement of 340B regulations.

In the event that HRSA gains regulatory authority over 340B policy, covered entities would be well-advised to begin preparing now to defend the dollars associated with their 340B program. Should HRSA seek to audit covered entities’ use of funds, the administration will likely utilize the “Single Audit” OMB A-133 process. Because the A-133 program is closely tied to existing federal grantee types (Hemophilia Treatment Centers, Ryan White clinics, etc.), HRSA may also choose to model its future regulatory approach on a similar system.

And while the same audit approach may not be applicable to an entity’s contract pharmacy operations, HRSA has already shown its willingness to pay special attention to this area of the 340B program, the same area that has been under scrutiny by federal legislators for quite some time(v,vi). Though the audit mechanism may be different, lawmakers may indeed require HRSA to examine more deeply this area of 340B operations.

Although none of us can accurately predict the future, from time to time we can make an educated guess. The current state of 340B oversight is a predictable outcome, arising from years of increasingly- energetic discourse among industry and legislative stakeholders. The size of the 340B program has grown dramatically in the last 10 years alone, and increased oversight is a natural consequence of that growth. Even if HRSA declines to take a more active role in 340B policing, the size of the program all but guarantees a more focused regulatory eye. Covered entities would do well to prepare now for the future, to avoid any surprises down the road.

About the Author, Jamila Seibel:
Jamila (“Jam”) is a Doctor of Pharmacy and Board Certified Pharmacotherapy Specialist, who joined The Alinea Group as a Managing Consultant several years ago.  Prior to her career in consulting, Jamila was heavily engaged in direct patient care; she has held the roles of Clinical Coordinator, Clinical Pharmacist, and Clinical Assistant Professor. Jamila has a strong background in pharmacy operations and pharmacy services implementation, and has led a series of program developments and clinical service initiatives at various healthcare institutions. As a part of the Alinea team, Jamila is actively engaged in 340B audits, compliance reviews, program implementations, and audit preparation, bridging the gap between the technical, regulatory side of the 340B program and the functional and operational challenges of pharmacy. 

About the Author, Russ Barron:
Russ Barron is an Associate Director with The Alinea Group and is a subject matter expert in 340B, health system medical record systems, pharmacy technologies and operations, with over 10 years of experience in the healthcare industry. Prior to joining Alinea, Russ worked with a service line consulting subsidiary of Zimmer, Inc., where he was a member of the orthopedics consulting unit. He has also provided management consulting expertise for technology matters to several Pittsburgh-based firms, including several Fortune 1000 companies.

(i) Government Accountability Office. 2011. Drug pricing: Manufacturer discounts in the 340B Program offer benefits, but federal oversight needs improvement. GAO–11–836. Washington, DC: GAO.

(ii) Wallack, M. C., and S. B. Herzog. 2011. Demonstrating the value of the 340B Program to safety net hospitals and the vulnerable patients they serve. Perspectives from SNHPA members. Washington, DC: Safety Net Hospitals for Pharmaceutical Access.

(iii) Medicare Payment Advisory Commission (MEDPAC). 2015. Report to the Congress: Overview of the 340B Drug Pricing Program. Washington, DC. Available at:

(iv) HRSA cites language from a House Energy and Commerce Committee report on legislation that eventually became section 340B of the Public Health Service Act (U.S. House of Representatives 1992).

(v) Grassley Requests Hearing on 340B Prescription Drug Pricing Program in Light of GAO Report:

(vi) 340B Legislative Update:, May 15, 2017