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Key takeaways from new GAO report on covered entities’ lack of compliance with 340B requirements

Nicole Longo   |     December 15, 2020   |   SHARE THIS

In case you missed it, the Government Accountability Office (GAO) released a new report looking at the 340B program and the mechanisms the government has to help ensure compliance with the program’s requirements. This is the latest in series of reports from the government watchdog that has raised concerns with 340B program integrity. Earlier this year, for example, GAO found it is likely that there are nongovernmental hospitals participating in 340B that are not eligible for the program but have taken advantage of the lax oversight of 340B so they can reap the financial benefits of it

In this new report, GAO notes that of the 1,240 Health Resources and Services Administration (HRSA) audits in fiscal years 2012-2019, as of September 2020, almost 900 of them resulted in at least one finding of noncompliance in covered entities. In total, GAO found more than 1,500 findings of noncompliance based on those audits – meaning multiple audits turned up several findings of noncompliance. This is especially concerning considering diversion and duplicate discounting are prohibited in the 340B statute. GAO also noted noncompliance with eligibility requirements, including covered entity oversight of their contract pharmacies.

Audit Findings issues to covered entities by HRSA

Perhaps more alarming is that HRSA acknowledges finding more instances of noncompliance but that beginning last year the agency began only issuing findings when “audit information presents a clear and direct violation of the requirements outlined in the 340B Program statute.” In the absence of binding and enforceable regulations, HRSA told GAO that beginning in fall 2019 “it would no longer issue findings based solely on noncompliance with guidance.” This calls into question how covered entity drug diversion can be adequately policed when even HRSA acknowledges in the report that “the 340B statute does not provide criteria for determining patient eligibility.” Congress prohibited diversion under the statute yet HRSA is essentially abdicating its role in overseeing that diversion does not occur.

Considering current conversations in Washington around the role of contract pharmacies, it is also important to note that HRSA told GAO it “did not issue eligibility findings for a failure to oversee 340B Program compliance at contract pharmacies through internal audits and other measures as set forth in guidance because the 340B statute does not address contract pharmacy use.”

The 340B program clearly needs to be revisited. The outdated and lax program requirements have made it virtually impossible to ensure program integrity. HRSA should start by clearly defining a 340B patient. They should also revisit hospital eligibility standards and reconsider the role of contract pharmacies in the program. These are just a few of the ways policymakers could take action to start to get this safety-net program back on track and working for patients. It’s long past time that we fixed the 340B program.

Nicole Longo

Nicole Longo Nicole is senior director of public affairs at PhRMA focusing on Medicare, 340B, importation and more. She previously worked for a D.C.-based public affairs firm where she assisted a wide range of clients with communications efforts on everything from trade policy to agriculture policy to health care policy. Outside the office, Nicole can be found trying new restaurants (usually Italian), taking an occasional barre class and cheering on the Cincinnati Bengals.

Topics: 340B

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