Kaine pitches reforms for drug pricing program supporting underserved patients, safety net providers

By purchasing drugs at steep discounts while charging insurers full prices, participants are meant to pocket the difference, which helps providers stretch their dollars and invest in additional clinics, staff or programming.

But some hospital chains were caught taking advantage of the program to shortchange patients, and state and federal lawmakers have spent years weighing potential reforms. 

To strengthen the program, Kaine’s new bill would prescribe new annual reporting requirements for participants and give the Department of Health and Human Services auditing authority. 

HHS would also be authorized to remove noncompliant entities who do not implement corrective action plans. 

A pillar of the bill, Kaine said, is protecting up-front discounts for participating providers rather than the rebate model some of his colleagues and President Donald Trump have favored. 

While larger hospital chains that utilize 340B may have the cash flow to manage a rebate model, smaller entities that primarily serve low-income or uninsured patients are “not providers that tend to have bank accounts with money sitting around unused,” Kaine explained. 

“If you require them to pay fully up front and then get a rebate sometime down the road, you really jeopardize their operations,” he said.

Earlier this summer, outgoing Louisiana Sen. Bill Cassidy, a Republican, introduced a model policy that diverges slightly from Kaine’s proposal and would implement a rebate model. 

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Cassidy, a former doctor and Kaine have been longtime participants in the bipartisan workgroup that has explored reshaping 340B.

The question of whether 340B’s growth should be scaled back is another key part of the debate. 

To qualify for 340B and increase the scope of the program in their operations, hospitals sometimes partner with contract pharmacies to improve access for patients or purchase outside clinics, branding them “child sites.”

Kaine’s bill would put “reasonable limitations” on contract pharmacies without specifically capping how many of them hospitals can have. It would also subject health systems with large numbers of such pharmacies to audits.

Additionally, the bill offers guidance for child sites by requiring they be wholly owned and integrated into the parent system. HHS would have registration and oversight procedures. 

The move is meant to disincentivize hospitals from purchasing child sites solely to expand their 340B footprint to increase savings. 

Federally Qualified Health Centers and clinics have long been subject to reporting requirements to ensure their 340B savings are being utilized properly, but hospitals haven’t. 

Health systems’ inflated participation in the program over the years “led to this odd situation where they had less requirements,” Kaine said. 

If it becomes law, his bill would also establish a clearinghouse operated by a third-party entity to catch and prevent duplicate discounts or diversion discounts,  when discounted 340B drugs are routed to ineligible patients for entities to try to glean additional savings. 

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“I think we’ve really tried to grapple with the two big issues,” Kaine said, naming cost growth and misuse of the program as the biggest challenges the legislation seeks to address. “We’ve done it in a way to preserve the core intent of what 340B is.” 

Kaine’s cosponsors on the legislation include Republicans Jerry Moran from Kansas, Shelley Moore Capito from West Virginia and John Boozman from Arkansas.  Democrats Tammy Baldwin of Wisconsin and John Hickenlooper of Colorado are also joint sponsors. 

Congress tackling the measure before the end of the year could be a legislative win for both parties and the president, Kaine said. But even if the bill doesn’t advance quickly, he said the lawmakers pressing for its passage “aren’t going anywhere.”

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