program was that manufacturers increased their sale prices elsewhere.
In particular, safety net providers experienced over a thirty percent
increase in the price of outpatient drugs in 1991, relative to previous years
where increases averaged closer to six percent. 12 Essentially, pharmaceutical
manufacturers were shifting the cost of the Medicaid drug rebate program on
to health care providers, and this shift threatened to bankrupt safety net
providers whose patients were disproportionately uninsured and
underinsured. 13 Accordingly, these providers lobbied Congress for relief and
the result was the 340B Program under the Public Health Services Act. 14
The purpose of the 340B Program was to provide discounts on covered
outpatient drugs to select safety net providers, including community health
centers. 15 According to the legislative record, the 340B Program was
designed to permit covered entities “to stretch scarce Federal resources as far
as possible, reaching more eligible patients and providing more
comprehensive services.” 16 In tandem with passing Section 340B, Congress
enacted Section 1927 of the Social Security Act, which requires drug
manufacturers who want their drugs covered within Medicaid to enter into an
agreement with the Secretary of HHS under which the manufacturer agrees
to comply with 340B requirements. 17 In other words, the 340B Program
requires drug manufacturers to offer the same rebate they offer to state
Medicaid offices to designated providers at discounts as a pre-condition of
continuing Medicaid coverage of a manufacturer’s outpatient drugs.
According to HRSA, the 340B Program provides additional financial
resources to covered entities without increasing the federal budget by
lowering drug acquisition costs while maintaining revenue from health
insurance reimbursements. 18 Accordingly, the 340B Program is designed to
promote access to affordable medications.
Since its enactment in 1992, the 340B Program existed with little fanfare
and scant government regulation until health care reform debates raised the
Program’s profile in 2010.19 In fact, OPA relied fully on discretionary
12. H.R. REP. NO. 102-384, pt. 2, at 12 (1992).
13. See id.
14. See Veterans Health Care Act of 1992, Pub. L. No. 102-585, §§ 601–03, 106 Stat.
15. See § 256b.
16. See H.R. REP. NO. 102-384, pt. 2, at 12 (1992).
17. See HEALTHRES. ANDSERV.ADMIN.,OFFICE OFPHARMACYAFFAIRS,
PHARMACEUTICAL PRICING AGREEMENT (2006), http://www.hrsa.gov/opa/manufacturers/
18. HEALTH RES. AND SERV. ADMIN., HEMOPHILIA TREATMENT CENTER MANUAL FOR
PARTICIPATING IN THE DRUG PRICING PROGRAM ESTABLISHED BY SECTION 340B OF THE PUBLIC
HEALTH SERVICE ACT (2015), http://www.hrsa.gov/hemophiliatreatment/340Bmanual.htm.
19. There was a U.S. Senate Bill introduced to expand the 340B Program in 2007. This
bill, S. 1376 and known as the “340B Program Improvement and Integrity Act of 2007,”