GAO urges greater oversight for drug discount program

Additional oversight of the hospitals and clinics covered by the 340B drug discount program is needed even though participants' use of program is consistent with its purpose, according to a Government Accountability report (PDF).

The Health Resources and Services Administration, the federal agency that administers and oversees the program, agreed with the GAO recommendations. The 340B program gives safety-net providers discounts on outpatient drugs.

The HRSA's oversight is inadequate because it relies on self-policing, according to the GAO. Yet HRSA officials told the agency that it does not have enough funding to increase its oversight of the program.

The report said that the number of hospitals in the 340b program has increased from 591 participating facilities in 2005 to 1673 facilities in 2011. It noted that hospitals that serve 340B-eligible patients also serve non-340B eligible patients, which can lead to “improper purchase of 340B drugs.”

Thirteen of the 29 “covered entities”—hospitals and clinics that participate in the 340B program—that the GAO surveyed said that they generated revenue through the program that exceed their drug-related costs, mainly through reimbursement for drugs by in-house or contract pharmacies. Ten of the 13 did not generate 340B revenue to cover drug costs, and six of the 10 did not have enough information to report to the GAO.

“All of the 29 covered entities we interviewed reported that the 340B program, including the up-front savings they realized on the cost of drugs, allowed them to support their missions by maintaining services and lowering medication costs for patients, which is consistent with the purpose of the program,” the GAO said.