Cassidy's new plan to overhaul 340B: Rebates, contract pharmacy limits and more changes

After years of investigation, the outgoing chairman of the Senate Health, Education, Labor and Pensions Committee has released his take on new legislation to reform the controversial 340B Drug Pricing Program. 

Sen. Bill Cassidy, R-Louisiana, unveiled a legislative discussion draft that would stand as the first statutory update to the subsidy program in 15 years if introduced and signed into law. 

Broadly, it contains a slew of measures that have been vehemently opposed by the hospital industry, such as allowances for drug manufacturers to offer upfront discounts or rebates following the submission of claims data “in order to reduce diversion or duplication of discounts,” as well as regular reporting from participating nonprofits on their 340B revenues, costs and eligibility. 

That said, some of the more contentious updates come with concessions to hospitals’ oft-stated concerns. 

For instance, participating providers would be allowed to choose how they wish to receive their discounts or rebates “rather than being subject to the manufacturer’s selection, provided that the covered entity passes along all discounts or rebates to the covered entity’s 340B patients” while collecting a nominal dispensing fee, according to a section-by-section summary provided by Cassidy’s office. 

Additionally, the data participating providers would need to provide would be standardized, with providers able to request adjudication on any disputed information and audits to be conducted at either the government or a drug manufacturer’s expense. 

Other sections of the discussion draft specifies new definitions for terms like “patient” and more explicitly outlines how program participants may employ contract pharmacies and child sites—issues that have been subject to substantial litigation due to ambiguities in statute that drugmakers say have allowed nonprofit health systems to pad their margins. Notably, the draft would limit a participating hospital to five contract pharmacies, not including mail-order pharmacies. 

Other targets include vendors and third parties that operate within the program that the senator’s office said have engaged in “predatory practices” to siphon revenue away from patients and providers alike. 

“Clearly, there are real transparency and oversight concerns that prevent 340B from translating to better access and lower costs for patients. Congress needs to take action,” Cassidy said in a statement. “This discussion draft proposes commonsense solutions to improve 340B for patients, ensuring the Program lowers costs for American families.”

The 340B program has grown to encompass $81 billion of drug purchases in 2024, or more than 16% of the country’s total drug spending. 

Drugmakers have said health systems have relied on loopholes and statutory ambiguities to improperly draw more revenue, and over the years have sought to impose requirements and restrictions they argue will increase accountability. On the other hand, hospitals staring down sweeping federal funding cuts have said that the discounts, granted years ago by Congress to subsidize care for low-income or uninsured patients, are more necessary for their financial stability than ever.

With healthcare spending an increasingly key political issue, legislators and the administration have lately been more receptive to drugmakers’ side of the debate. Cassidy, who is leaving Washington in January, has been weighing proposed reforms for years. His office launched an investigation in 2023 that last year yielded a report whose findings now serve as the bedrock of the discussion draft, and has another ongoing investigation into Apexus, the 340B program’s current prime vendor.

Cassidy is seeking stakeholder feedback on the legislative discussion draft—essentially a working version of his planned bill—by Aug. 28.

Maureen Testoni, president and CEO of 340B Health, which represents over 1,600 hospitals participating in the program, said the proposals would "profoundly alter 340B" and limit safety-net hospitals' ability to provide essential care.

"We have serious concerns with provisions that would narrow the definition of a 340B patient, impose eligibility limits on hospital off-site outpatient facilities, and authorize a harmful 340B rebate model, among other changes," she said in a statement. "Put together, these restrictions would result in far fewer opportunities for hospitals to access key 340B savings that they need to care for their patients."

340B Health stressed that Cassidy's proposals are still a work in progress, and that its members will be informing the senator about how the changes will affect them.

Beth Feldpush, senior vice president of policy and advocacy for America’s Essential Hospitals, didn't pass judgment but said her industry group is looking forward to working with the senator “to strengthen the program and ensure 340B hospitals have the resources they need to best serve their patients. We are particularly eager to ensure no burdensome requirements are placed on 340B hospitals, favoring drug manufacturers that have continually sought to undercut this vital program and increase profits at the expense of patients.”