A government watchdog found that deficiencies in federal oversight of the 340B drug discount program may have allowed some nongovernmental hospitals that do not meet eligibility requirements to participate anyway.
Hospital participation in the 340B discount program has tripled since 2009, and as of January 2019, 67% of those hospitals are private, not-for-profit hospitals. To participate in the 340B discount program, these hospitals have to prove that they have a contract with state or local governments to provide healthcare services to low-income individuals who are not eligible for Medicare and Medicaid, but the Government Accountability Office found several weaknesses in how the Health Resources & Services Administration oversaw these contracts.
"GAO found that HRSA's processes do not provide reasonable assurance that participating nongovernmental hospitals meet eligibility requirements," GAO auditors wrote.
Auditors found that 25% of hospital contracts they reviewed did not specifically require hospitals to serve low-income individuals as defined in the 340B statute.
Some contracts also did not span the entire HRSA audit periods, which should have triggered a finding of noncompliance and refunds to manufacturers for any improper discounts to hospitals. But the GAO found that HRSA did not issue penalties, and instead allowed hospitals to submit retroactively dated contracts.
"We continue to believe that this practice—accepting new contracts that are retroactive— effectively allows hospitals to avoid audit findings," GAO auditors wrote.
HHS said HRSA addresses audit issues on a case-by-case basis.
American Hospital Association Executive Vice President Tom Nickels said the group plans to closely review the GAO report.
"Most important is that tax-exempt hospitals are accountable to the government and their communities in a variety of important ways. For example, they publicly report annually the benefits they provide. In the most recent year for which comprehensive data is available, 340B tax-exempt hospitals provided more than $56 billion in total benefits to their communities," Nickels said.
The GAO recommended that HRSA verify contract status for nongovernmental hospitals and tighten integrity check requirements. HHS responded that HRSA has already made improvements to its audit process for 340B eligibility, but said it does not have the resources to verify contracts for every nongovernmental hospital in the 340B program.
"While we understand that verifying the existence of contracts for all participating nongovernmental hospitals would require additional effort on HRSA's part, our review found that relying on hospitals' attestations is not sufficient to ensure hospitals' eligibility," GAO auditors wrote.
The report was requested by Senate health committee Chair Lamar Alexander (R-Tenn.), House Energy & Commerce Chair Greg Walden (R-Ore.), Energy & Commerce health subcommittee Chair Michael Burgess (R-Texas) and Energy & Commerce oversight and investigations subcommittee Chair Brett Guthrie (R-Ky.).