December 8, 2011—A second congressional committee in as many weeks has heard expert testimony on what is causing critical shortages of generic injectable drugs, including whether 340B drug discounts are part of the problem and, if so, to what degree.
The Dec. 7 Senate Finance Committee hearing came just eight days after the one held by the House Oversight and Government Reform Subcommittee on Health Care and eight days before a third to be held by the Senate Health, Education, Labor, and Pensions Committee.
During the Finance Committee session, Sens. Orrin Hatch (R-Utah) and Charles Grassley (R-Iowa) emphasized the impact that federal drug pricing programs might be having on drug supplies, with Grassley citing the 340B program specifically. On a separate front, both senators have been pressing the Health Resources and Services Administration (HRSA) to ratchet up its oversight of 340B to guard against potential abuse and to begin auditing 340B covered entities.
Grassley described the problem as one of “well-intentioned policy leading to unintended policy outcomes,” Grassley said. “We have seen a dramatic increase in 340B institutions in the last five years taking advantage of that low-price regime,” he pointed out. That development and other federal policies, he said, have driven down the prices of some drugs to unsustainable levels “and changed how the market operates for generic injectable drugs.”
Hatch, meanwhile, said he does not believe “it is simply a coincidence that shortages are disproportionately impacting products with highly complex manufacturing processes that are also some of the lowest-price therapies.”
“And I am not the only one to think that economic incentives play an important role in this issue,” he continued. “Experts contend that federal government pricing and rebate programs are a significant contributing factor to the current drug shortage crisis.” Hatch noted that he is drafting legislation that “addresses some of the federal price control and rebate structures that prevent the true costs of bringing these important medicines to patients from being adequately addressed.”
But just as during the House hearing a week earlier, other lawmakers questioned whether the 340B program, representing about 2 percent of total U.S. drug spending, was even capable of contributing to shortages in any significant sense.
“There are folks who have asserted that the 340B program is a source of the problem of shortages,” said Sen. John Thune (R-S.D.). He asked the witnesses if they had seen any evidence to that effect.
Repeating what he told the House committee eight days earlier, Dr. Kasey Thompson of the American Society of Health-System Pharmacists answered that “we see no evidence that the 340B program is a contributing factor at all.”
Dr. Scott Gottlieb of the American Enterprise Institute had also previously testified before the House panel and he repeated his belief that generic injectable drugs should be exempted from 340B pricing and other “price control schemes that distort market prices and reduce incentives to invest in new production.”
In his written testimony, Gottlieb added that “with respect to 340B, perhaps the most damaging proposal would be to expand this program to the hospital inpatient side.”
“Such a proposal could have a significant impact on profits on these drugs, and could dramatically impact decisions to invest in new lines or expanded facilities,” he said.
Rena Conti, an assistant professor of health policy and economics at the University of Chicago, noted that although 340B’s elimination or reduction “would potentially transfer more money to firms so they would potentially make more of these drugs,” it would also force “disadvantaged or vulnerable hospitals … to purchase these drugs through other contracting mechanisms and potentially face increased prices.”
Conti said “the key question with the 340B program is how important (it) is to the overall purchasing of these sterile injectable drugs and what alternative options there are for safety-net providers to be able to purchase these drugs at prices they can afford.”