policy events in washington dc and around the country. cspan is brought to you by your cable or satellite provider. on wednesday epa administrator scott pruitt answers congressional questions on his budget. he testified as a senate appropriations subcommittee hearing at 9:30:00 p.m. eastern. in the afternoon, christopher ray goes before a different senate appropriations subcommittee. that hearing starts 5:00 to 2:30:00 p.m. here on cspan 3 and the house is expected to begin debate on the farm bill wednesday or thursday. it sets farm policy food programs and agriculture trade through 2023. a final vote planned for friday. watch live coverage of that debate and votes this week on cspan.

the senate hearing focused on how proposed cuts to a federal drug pricing program called 340 b would impact health organizations serving low income and rural families. witnesses include officials from the health and human services department and the government accountability office. this is an hour ten minutes. president trump announced a blueprint on drug pricing. it appeared to put patients and

taxpayers first. the administration is beginning to tell us more about what they have in mind. some are asking, in some cases they're asking for input from the public about some their objectives. so it may take some time before we know what the specifics of all the proposals are. many of the proposals appear to be in the jurisdiction of other committees but some of the more important pieces will be in the jurisdiction of this committee. including over the counter drugs which this committee has all ready taken steps on such as legislation we approved last month to make it easier to get over the counter drugs to market by modernizing the outdated monograph system. examining the relationship of the list price to what the consumer pays. that should be in our jurisdiction. policies to prevent drug manufacturers from gaming our current system. some of these can be done by administrative action. others will require legislation. we'll be working with the

administration on scheduling a hearing. and other ways such as round tables or additional briefings with staff and with members of the committee to learn more about their proposals. the administration has all ready started that process. the president announced the proposal on friday. the secretary had a bipartisan call for senators the same day. the department has begun briefing staff. we'll continue to make sure that members and staff know as much as we can know about the proposal. but today's hearing is the second in a series of hearings about the 340 b program. for several months now the committee has turned our attention to the high cost of health care. we've held three hearings on the cost of prescription drugs as a part of that. most recently w the national academy. -- with the national academy. like those hearings, today's hearing is bipartisan. which means the senator and i

agreed to it. and the witnesses bipartisan. and we thank you both for coming. so i know senators have a right to talk about everything from health insurance to football in their five minutes. and often do. but i hope we can focus on this unusual opportunity to get independenting evaluation of the 340 b program from the experts we have here today. i hope we can determine what's the purpose of the program? is it fulfilling the purpose? should there be changes in the law so the program can fulfill that purpose? senator more are i and i will each have an opening statement -- senator murry and i will each have an opening statement. the senators will each have five minutes to question the witnesses. and our first hearing, we heard from hospitals, drug companies, community health centers, and pharmacies, and we learned there's a lack of agreement on the following question, what is the total amount that americans spend on prescription drugs ? what percent of that spending

is subject to the 340 b discount? how much do hospitals and clinics save through the 340 b discount? and on what do they spend those savings? this lack of agreement on the amount of money and how the money is spent makes it hard to properly over see the program or to know how much the savings -- or how much of the savings hospitals and clinics receive from discounted drug prices and are used to reduce the price of drugs and treatments for patients and how much is spent on other activities. very well may be that most are using the savings to benefit low income patients as intended. or it may be that the other activities meet an important public objective. but it's hard to know until we have more information. today's hearings, we're hearing from the government accountability office, gao, and the department of health and human services office of the inspector general. who have examined and published a number of over sight reports

from the 340 b program. we'll have a third hearing, which was suggested by senator cane, we'll have that later this year. to hear from the health resources and services administration. today's hearing, the gao, the department of health and human services office of inspector general are nonpartisan, federal watchdogs. that issue recommendations on how federal programs could run better. in 2011, gao found that hrsa over sight of the program was quote inadequate. saying hrsa's over sight is inadequate because it relies on covered entities and manufacturer's self policing. that is participants ensuring their own compliance with program requirements. and in 2014, hrsa drafted regulations to define what a patient is. hrsa was sued in 2014.

the court found they lacked authority to engage in such rule making limiting what it can do to over see the program. the inspector general of the department of health and human services has come to a similar conclusion that over sight of the program has been inconsistent. and hrsa lacks authority to over see it. to improve over sight, the inspector general recommended hrsa clarify which patients are eligible to receive 340 b drugs. how they can use pharmacies to dispense 340 drugs. another concern raised by the inspector general is that states need have more information about the price and discount of drugs in the program properly reimbursed through medicaid. it recommended that there be more transparency on the price of 340 b drugs to ensure states are making accurate payments. i hear often that hospitals and

clinics are are using the 340 b program to benefit low income patients or serve another worthy public objective. but i'd like to hear more about if hrsa's lack of over sight authority has made it difficult for us to have agreement on the common set of data about the 340b program so that we can make such determinations. senator murry. >> thank you very much, mr. chairman. and i'm glad that we're able to continue this discussion about the 340b program with witnesses from the government accountability office and the department of health and human services office of the inspector general. i'm interested to hear more about how this program helps so many hospitals and health centers stretch their resources and serve their communities and how we can strengthen and preserve it. 340b is critical for safety net providers that care for patients and families with the greatest needs and fewest resources. the program works by requiring pharmaceutical companies to sell drugs at a lower price to

health providers who take on a larger burden by serving vulnerable populations and low income patients. the congressionallal intent of this program is to help providers stretch scarce federal resources and provide more comprehensive services. they're using their 340b savings to do that. olympic medical center uses 340b savings in squim washington to fund the only full service cancer center on the olympic peninsula allowing patients to access treatment close to home and provide treatment regardless of whether patients are able to pay. without 340b the center would operate at a loss and have to cut back that program. at evergreen hills in monroe, washington. they use 340b savings to fund the program for pregnant women struggling with substance abuse, a primary care center, and discounted care facility needed. without 340b evergreen would operate at a loss and have to

cut programs. on the east side of the state. they use 340b to serve rural communities in washington, idaho, and montana. 340b saves helps support nicus that helps baby's born prematurely. an er. no cost behavioral health services and financial support for cancer patients. it's clear 340b has helped care providers that are so essential to their communities stretch their resources farther than they could otherwise. but that doesn't mean we can also have more clarity in the 340b program. we should strengthen the program and have more accountability and transparency for everyone in our drug system. we should be confident entities are using their 340b savings appropriately. and pharmaceutical manufacturers are providing 340b discounts fairly. if there is misuse or abuse in the system, we should hold those actors accountable.

and there have been opportunities actually to provide that accountability. but unfortunately, president trump seems uninterested in actual over sight or program integrity. he has continued to sabotage efforts to make sure drug companies play by these rules. the affordable care act gave the health resources and services administration hrsa new authorities to keep the 340b program accountable. and after the inspector general for the department of health and human services found many drug companies were over charging, hrsa drafted a rule to make sure companies were giving discounts required by the 340b program. the obama administration finalized that rule. but the trump administration has delayed its implementation over and over. the most recent delay came last week. the came week he gave a speech claiming he was getting tough on drug companies and when hrsa attempted to provide more clarity, instead of improving

the draft and working with stakeholders to develop, the trump administration took a giant step back and withdrew that guidance, abandoning the effort completely. and they haven't just backed away from accountability and clarity for the 340 b program. they've tried to cut it as well. 340b eligible providers have traditionally been reimbursed by medicare at the same rate as everyone else. this year the trump administration announced they would unnecessarily, and dramatically cut the program and reimburse 340b hospitals for drugs at a rate nearly 30% lower than other hospitals. president trump can talk and tweet about lowering drug prices all he wants but when his only concrete steps are to hold back rules that would provide accountability and prevent drug companies from over charging, role back guidance to clarify how the 340 b discount program works, and cut resources for providers who are caring for the patients of families least able to afford

health care. he's not going to have a lot of credibility and his promises won't come true. even if president trump doesn't appreciate the value of the 340b program. many hospitals across the country. and many patients they help do. like the retired social work ur in centralia, washington, who's been fighting melanoma for seven years, thanks to the 340 b program, her medication costs $45 a month. without the program, it would cost several hundred dollars. like a man in olympia washington who lost his health insurance while fighting a very aggressive cancer. thanks to 340 b, he can afford to continue his chemotherapy. like many patients in struggling communities across the country, the health care might be out of reach or out of their budget. but have learned a health provider was able to use 340b savings to stretch its resources far enough to cover them. there are many stories from my state and across the country about how this program is so

important. so i'm very glad we have this opportunity to discuss how we make sure 340b remains accountable enough to fulfill its intent. and strong enough to continue serving our communities for generations to come. so i look forward to hearing what our witnesses have to say about this day. and thank you mr. chairman for having this hearing. >> thank you senator murry. and thanks for your cooperation in scheduling these hearings and the witnesses. our two witnesses today are independent witnesses. who spend -- who have focused their time studying the 340b program. first we'll hear from the assistant inspector general for evaluations and inspections, with the office of inspector general at the department of health and human services. she served that office for 18

years. in her current role she conducts national evaluations of programs. second debra draper, health care team director with the government accountability office. miss draper has extensive background in health care finance, and administration research. she focused on health policy research in medicare, medicaid, and the delivery of health care services. welcome our witnesses. and if you each would summarize your remarks in five minutes, then we'll go to questions. miss maxwell, let's begin with you,. good morning, chairman alexander, ranking member murry, and other distinguished members of the committee, i'm pleased to join you in discussing how to strengthen the 340b program. thank you for bringing me to the attention role of the robust over sight. we share the commitment to over sight and has over the years worked to ensure the 340b

program has the internal controls that would allow us to feel confident that the program is offering to better the health care needs of low health care patients. long gone are the days when it was difficult to tell who was in the program. what remains to be done is to build on that progress. and resolve some long standing challenges from two key areas, one, lack of transparency, two, lack of clarity in program rules. these challenges compromise the program's ability to fully deliver the mandated discount. to overcome these challenges, they've made several recommendations. oij recommends that hrsa makes prices transparent by sharing them with providers and states. this will allow providers and states to verify they're not being over charged. currently providers have to

trust that drug companies are are in fact providing the mandated discounts. similarly, states have to trust that providers are passing along that discount for medicaid patients. we think there should be an ability to trust but also verify. especially since we have no instances of over charging in our work. congress did give hrsa authority to share these prices with providers in 2010. however, agee years later, hrsa is working to implement a secure data system to share the discounted prices with states, hrsa would need more authority. in addition to pricing information, states need transparency. medicaid claims represent 340b drugs. even if states gain visibility into prices as recommended, medicaid may still end up over paying for drugs unless they can identify which claims to be reimbursed at the lower 340b

prices. transparency in 340b drug claims would also assist states in rebates from drug companies. without it. states may lose out on rebate savings if they misidentify a drug as having all ready received a 340 b discount. on the other hand, misidentification of 340b drug claims puts drug companies at risk of paying duplicate discounts on the same drug. oig recommends hrsa work to ensure that 340 b claims accurately identified. the secondary ya needing improvement is to clarify 340b program rules which in some cases failed to keep up with the evolving complexity of the program. in particular, oig workers identify two areas in which program rules lack clarity and as a result are not consistently implemented. first, the guidance addresses

patient eligibility. but leaves room for interpretation as to which of the patient's prescriptions might be eligible in retail pharmacy setting. in these retail settings, we found providers in fact are making different determinations of what prescriptions are eligibility for the 340 b discount. second, program guidance does not stress how to handle uninsured patients. in our review of retail pharmacies, we found that in some instances, uninsured patients were paying out of pocket, full price for drugs that had been purchased at steep discounts. hrsa should clarify whether providers must offer discounts to uninsured patients. to support hrsa's effort to create clear, enforceable program rules, we encourage congress to consider providing hrsa with general regulatory authority over the program as their current authority is limited. i appreciate the opportunity to

present oig's recommendations to improve the 340b program. greater transparency and 340 prices and claims along with clear program rules will ensure that the full benefits of the program support low income patients who depend on our nation's health care safety net. at this time, i'm happy to be of assistance if you is any questions. thank you. >> thank you. dr. draper, welcome. >> thank you. chairman alexander, ranking member murry, and members of the committee, thank you for the opportunity to be here to discuss the 340 b drug pricing program. the 340 b program was created by a statute in 1992 and is administered by hrsa. the intent is to enable participating entities, also known as covered entities to stretch scarce resources to reach more eligible patients and provide more comprehensive services. participation is voluntary. but there are strong incentives to to so.

covered entities such as certain hospitals and qualified health centers can realize substantial savings through 340b drug discounts. 20 to 50% of the cost of out patient drugs. and generate revenue to the extent that any reimbursement exceeds the 340b drug price. for drug manufactures. 340 b permanent participation is required to receive reimbursement for the out patient drug. since the program first became operational in 1993. it's experienced exponential growth in the number of covered entities and contract pharmacies. in 1993. the program had approximately 400 covered entities. and by 2017. there were more than 12,000 representing approximately 38,000 covered sites. prior to march 2010, only one contract pharmacy was allowed for covered entities without an in-house pharmacy. in march 2010, hrsa lifted that

restriction. and as a result, the number of contract pharmacies increased from about 1300 in 2010 to nearly 19,000 at the beginning of 2017 encompassing more than 46,000 arrangements. in 2011. we reported the over sight as a 340b program was inadequate to provide reasonable assurance that participants were in compliance with program requirements. as a result of the identified weaknesses, we made four recommendations. one reck mennation was for hrsa to conduct interviews. to ensure compliance. this recommendation was the result of our findings that hrsa primarily relied on participants to self police and ensure their own compliance. in 2012, hrsa initiated covered edgeties. and conducted 200 audits annually. this are represents less than 2% of the total number of

covered entities participating in the program. the audits have identified instances of noncompliance, including the dispensing of 340 b drugs to ineligible patients. a second recommendation was to clarify guidance for cases in which the drug is restricted. this recommendation was the result of our findings. in cases such as when the supply of a drug is inherently limited, manufacturers may have restricted distribution, but the manner in which they did so was not always clear. hrsa issued updated guidance in 2012. the remaining two recommendations were for hrsa to issue more specific guy dance on the definition of a patient eligible to receive a drug purchased through the 340b program and the criteria they must made to participate. the recommendations are the result of findings that the lack of specificity in the guidance could be interpreted in ways not consistent with the

program's intent. hrsa's attempted but not succeeded in addressing the recommendations. in 2012, hrsa developed a comprehensive program regulation. but a court ruling found that its rule making authority was limited to specified areas. in 2015, hrsa issued proposed guidance buzz subsequently withdrew plans to finalize it following the administration's directive to agencies. more recently hrsa indicated it needs broader regulatory ability. they've taken steps to improve integrity in its over sight of the 340b program. a number of important issues remain. including whether the intent of the program which was established 25 years ago is still relevant today. given the vastly changed health care landscape and 2340b program environment -- 340 b program environment. and continued lack of specificity and program

guidance. most notably the definition of a patient. and hospital eligibility criteria. until the issues are resolved. there will continue to be questions about the integrity of the 340b program and hrsa's ability to provide effective over sight. this concludes my opening remarks. i'm happy to answer questions. >> we'll now begin a five minute round of questions. senator isackson. thank you mr. chairman. thanks to those of you being here. i was sitting here contemplating what i might ask. realizing i'm so confused. i don't think i'm at a point where i can ask a question. this reminds me of some explanations of government programs that are are sometimes so complicated the simple avoids us, but you were just talking about determining the -- if we still are carrying out the intent of the original program, the intent of the original program is to lower the cost of drugs to in-need

patients. is that correct? >> that's not explicitly stated. >> explicitly state for me what the purpose of the program was. >> yeah. the intent of the program -- this is in a house report that accompanies the legislation. to enable participating entities governance entities to stretch resources to reach more eligible patients and provide more comprehensive services. >> that would be like hospitals and providers like that. >> federal grantees. federal qualified health centers. >> there are 19,000 as of this year. >> correct. with 46,000 sites. >> the pricing of the pharmaceuticals is done by the pharmaceutical company that sells them to the hospital provider. is there a middleman that they go through? a benefit manager or the insurance company? or does it go directly to the hospital? from the hospital to the --

>> yeah, the -- the covered entities, there are some restrictions on how they go about purchasing the drugs. for example, they can't use a purchasing organization because of some of the issues around the discounts. they can use hrsa's prime vendor program to purchase the drugs. >> those are various ways. >> there are various ways they can acquire the drug. >> but under the rules the pricing is the same no matter what in terms of the pharmaceutical company. >> whatever the list price is from the pharmaceutical company. >> and you or miss maxwell made a comment about there wasn't enough transparency to be sure if the program is functioning at optimum intent. i take that meant from the pharmaceutical companies justifying the cost they're charging, is that correct? >> our focus on transparency is making sure the full benefits of the program are realized by the 240 providers as well as states. right now they don't have visibility into prices. >> how do you currently do that? >> right now states and

providers don't have visibility in what the set prices are. they simply pay what they're charged. >> that's why you use the term -- it sounds like we have a problem in terms of a system to evaluate. in listening to the testimony of both of you. we need to trust we can verify the cost. and make sure providers become eligible to make purchases are qualified and delivering it to the intended people. that's what it sounds like to me. we probably need to work on that mr. chairman as a committee. to help them in the governance programs. i yield back the rest of my time. >> thank you senator isackson. senator murry. >> both of your testimony speaks strongly to a greater need for 340 b program integrity. and i support the efforts by hrsa to ensure 340b resources are being used to help safety net providers stretch their scarce resources to serve those

in greatest need as you stated was the goal. miss maxwell. did the affordable care act require regulations to make sure drug companies were charging the appropriate amount or ceiling price for these drugs and to hold them accountable for over charging? >> yes, it did. and it was outlined in court. >> when was the regulation finalized? >> january of 2017. >> why hasn't it been implemented. >> since finalizing the rule. hrsa delayed the effective day. as you mentioned multiple times. and proposed to delay the effective date to july of 2019. >> to the delay, the trump delay of continuing to implement that is having an impact. and i notice they delayed it again last week. the same week as i said the president said he was cracking down on pharmaceutical industry. so they're not moving forward on the this, i would assume, you would say that, yes? >> yes.

in addition to that, the rule, delegated, the authority of the oig. the oig hasn't received referrals for enforcement of authority. and we don't anticipate any until the rule is finalized. >> your testimony recommends the definition of 340b eligibility patient and the criteria for hospitals to be clarified. that needs to be done in a way that strengthens this program and helps many patients. has hrsa attempted to address the issues of hospital eligibility and patient definition to ensure that 340b is being implemented consistently across the country? >> they have attempted to do it with the 2014 regulation. and the guidance that was pulled back in 2017. so it's still an issue. and you know, i think part of the issue for example with the definition of a patient, there's a lot of covered

entities. we consider that -- look at that very narrowly. and others look at that very broadly. so you have a wide range of how that's being interpreted. so the entity says look at it very narrowly, there could be patients who could benefit from the program who are not getting thatter is sis because of the definition of how the hospital or entity is interpreting the guidance. >> what happened to the draft guidance? >> it was pulled back in 2017 based on the administration's directive to agencies to pull back any pending regulations and guidance. so instead of working with stakeholders to provide more clarity it was pulled back and the administration punted again. as i said in my opening remarks. i think that's sabotage and hindering efforts to improve transparency, accountability, they cut back the program and argue in the drug pricing plan, the program doesn't work. so i think that's just not the right approach. and i just wanted everybody to

understand that's what's happening. i wanted to ask one more question, hospitals provide for the community in more ways than simply caring for uninsured patients. the university of washington uses the program to support medical care, what they call the 18-11 eastlake housing project for individuals who struggle with homelessness and alcohol abuse. and that care model helped king county save $4 million by allowing those individuals to avoid the more expensive services like the emergency room. we've heard from some stakeholders that reporting 340 b savings in the services they provide would reduce complexity. and increase transparency and better insure compliance. from your work on 340b, do you think additional reporting from hospitals on their use of 340 b savings is helpful for program integrity? >> we are very supportive of

program integrity. we think it will provide greater transparency. in thinking about responsible reporting. we need to weigh that against the potential provider burden. we think responsible reporting is most valuable when cried to clear program goals. >> so what would -- when tied to clear program goals -- >> what would be the best metrics to determine which hospitals are good program stewards. >> i wouldn't be the best person to opine on that. we find the most value in reporting when it's tied to clear program goals and rules. and as we noted all ready, this program lacks clarity in the intent of the program. >> dr. draper, what is a good metric? >> i think currently the program does not require any roaring of how revenues are spent. and anything program, i think it would, you know, enhance the integrity of the program.

and i also think that's tied to the issue the program? i think there's ambiguity around what is the actual intent of the program. a lot of people think it's a program for low income people. indirectly they may benefit. >> okay, thank you. thanks senator mu >> thank you mr. chairman. according to the main hospitals. 25 maine hospitals qualified for the 340b drug discount program. and they receive a collective benefit estimated to $105 million a year. 14 of those 25 hospitals all ready have negative operating margins. for some of the other 340b hospitals, with positive operating margins, the value of

the program represents the difference between a positive operating margin and a negative one. at the same time, part of what is driving the narrow hospital margins and losses in maine is the growth in pharmaceutical spending. maine hospitals have experienced a 30% increase in drug spending over the past four years. i wanted to give you that background because the hospital association in maine has told me that if we were to limit or eliminate the 340b benefit. it would wipe out the positive operating margins for those hospitals that actually are in the black. miss maxwell, you testified

about the lack of transparency to ensure that the 340b providers are not over paying pharmaceutical manufacturers. what can we do to increase transparency and ensure that over payments are not occurring? >> thanks for the question, it's a really important one. and one that speaks to a number of our recommendations around transparency, we think the best way to provide better transparency is for hrsa to share trekly with providers as well as states. >> is there any reason that hrsa is not doing that now? >> in terms of providers, hrsa does now have the authority granted in 2010 with the aca. but they have not made -- they have not completed their secured data system. my understanding is that that is in progress but it's not completed. and may not be completed until the completion and effective date of the ongoing rules about

fueling price. in terms of sharing information with states, that would require more authority from congress for hrsa to be able to share that. >> thank you. i held a hearing in the aging committee last week on the increase in the price of insulin. during the past ten years when it's tripled despite the fact that insulin's been around since 1921. and granted there are different modifications. but once again, we ran into this lack of transparency. and the american diabetes association did a chart that shows the number of middlemen, including pharmacy benefit managers, wholesalers, distributers, insurers, that are between the manufacturers and the fact that rebates and discounts often do not have -- get passed on. so when senator isackson was talking about that lack of transparency in the system, and

listening to your testimony, i think that that is the major problem in the pharmaceutical network if you will. and it sounds like it's partly an issue here as well. >> indeed. >> thank you mr. chairman. >> thanks senator collins. senator cane. >> i'm glad we're having this hearing. i look forward to the hearing with hrsa as well. thanks to the witnesses for being hear. miss maxwell, first for you, i want to talk about one of my critical health care providers, virginia commonwealth university. the largest hospital in virginia. an urban disproportionate shared teaching hospital. and it's representative of the hospitals that could be hurt most by cuts to reimbursements for drugs. savings have allowed these units to innovate. they created a managed care program for the uninsured or vc

state. the program shot in insurance coverage but it's a partnership between bcu and health dare providers to treat qualified uninsured individuals. when congress passed the program. it explained it wanted to stretch resources further and provide more comprehensive services as dr. draper read. statements by the oag and reports were a factor in the nearly 30% cut to payments to the 340b hospital that went into effect in january. i'm looking at one of the reports that the oig has done. which is a report dated november 2015. and i just want to read from the conclusion quote, page 13, it's important to note that our analysis was entirely financial. we did not examine the effect these changes would have on

covered entities ability to serve their communities. so just to be clear. the oig report, this one in particular, did not examine how the cuts would effect urban and teaching hospitals ability to offer more comprehensive services to their needy patients. >> that's correct. the focus of the report was to provide an independent analysis of how this savings might be shared across different players. we understood stood there was a policy conversation happening about the need to bring down costs and taxpayer funded medicare. as well as a need to reinvest in health centers. and we wanted to provide data to enable that conversation. >> that's an important point to make. we have to grapple with the costs and efficiencies. we also have to grapple with the consequences the patients like hospitals of bcu of cuts and try to balance those out. and that's a fair statement isn't it. >> that's true. and it's good to note that policy changes like this,

changes is financial equation. and it's possible that the hospital could opt out of 340b all together. if they do that, the discounts are lost to all parties. to the hospitals, to medicare, and medicare patients. >> and that would have significant consequences as well. dr. draper, for you, i agree. i think the chair and ranking member in their testimony have talked about the need for government over sight. in your testimony you report that hrsa audited 200 covered entities in 2017 to insure compliance with the program which is a four fold increase over the number of audits done in 2014. given the number of covered entities that sounds like a good thing to do. how many manufacturers did hrsa audit to insure they were in compliance with the program and not over charging. >> according to the website in 2015, they audited it once. and in 2016 and 2017, they

audited five. and on their website, they report no findings for the manufacturers. so it's not a systematic process as it is for the covered entities. >> and i would suggest, and i think the ranking member got into this in her questions as well. if we're going to be doing these audits and be systematically auditing the providers, we should also be systematically auditing the manufacturers. dr. draper, according to your testimony, the gao is preparing additional reports on the 340 b program. and i wanted to ask you, what are the areas that you're examining, and when will these reports be ready? >> we have two reports coming out. they'll come out this summer. one report is looking at the issue around contract pharmacies. we're looking at the extent to which covered entities the contracting with contract pharmacies and some characteristic of the pharmacies. we're also looking at the extent to which discounts are passed on to low income

patients or individuals from the 340 b program. we're also looking at hrsa over sight of the program. and including -- we're also going to be delving a little bit more into the audits of the covered entities. and then the fourth thing we're looking at is looking at financial arrangements between covered edgeties and contract pharmacies as well. who have cpas. there's a whole industry that's evolved around the 340b program. that's something we'll be looking at as well as with the tpa arrangement. >> excellent. thank you mr. chair. >> thanks senator cane. what arrangement? >> third party administrator. so a lot of those are, they work with 340b covered entities to help set up and manage their 340b programs. >> thank you. senator cassidy. >> just to follow up on what senator cane said because

obviously the program is being used as it is to be used to help lower income folks, that's a good thing. but i want to quote a new england journal of medicine article in which nyu researchers found that if you look at the provision of cancer care at a 340 b program verses a non340 b program. there's actually fewer lower income patients in that cancer care. the 340 b program which is getting this discount to provide more services, statistically is associated with providing fewer services. and there's no significant difference in hospital provision, a safety net, or in patient care for low income groups or in mortality among the low income residents of the hospital. if you will, it's an indictment. because theoretically, this is supposed to -- i worked in a 340b hospital. some of them are fantastic. and there are patients at the hospital where i worked that only got medicine because of

this program. but it seems as if there are issues with how it's currently being done. i noticed consumer groups are advocating for it. i'll point out something else. last week, memorial sloan- kettering's drub pricing lab reported research -- or made the suggestion that should 340b hospitals be required to provide charity care totaling just 1% of their patient revenue, 9% of 340b hospitals would no longer be eligible for 340b. that's if they provided just 1% of their revenue for charity care. secondly, i'll point out, that if you say that the way the business model works is that the more expensive the drugs, the greater the discount, if the hospital is not returning that discount to the patient or the federal government, nay get

a bigger spread with a more expensive drug. now, miss maxwell. i think i've seen evidence that the incentive is for the 340b program to use the more expensive medicine because that increases their spread. is that reasonable? do you agree with that? >> the work of the ig has not touched on that particular issue. our focus -- >> let me ask dr. draper. >> we looked at medicare part b drugs in the 340b program. in network we found that the 340b hospitals were generally larger. often teaching hospitals. they tended to have lower over all margins but higher medicare margins, and we also found that medicare part b spending at those hospitals was substantially higher than nondish hospitals. >> medicare part d, so the

interaction between that and 340b is that 340b would cover the infusion drugs given on a medicare part b billing, correct? >> yes, if it's an out patient drug. >> yes, so when you say that the differential is higher, it implies at least that they're using more expensive services or greater intensity of services for whatever reason. and that would include potentially using more expensive medications. >> well it's suggested there may be some financial incentive. unintended incentives for prescribing patterns. >> thank you. you also mentioned that 340 b entities tend to be larger hospitals. last week researchers from yale, pen, carnigy, melon, and mit published a paper that found among other things, prices at monopoly hospitals are 12% higher than in markets with four or more rivals. does the current structure of

the 340b program incentivize consolidation? >> we haven't done work on that. i can't address that. another one of our reports coming out this summer is comparing characteristics of 340b hospitals and non340b hospitals and looking at how the characteristics have changed pre and protest health care reform. >> so that report is pending. >> yes, that will be coming out this summer. >> okay, and then in 2014, oig published a report that provided useful insight into whether benefits of the 340 discounts were slowing. the agency found a few of the hospitals surveys said they passed the 340b discount back to the uninsured patient. these are the ones, it's not blue cross, the uninsured patient who can hardly afford their medicine. the insulin for example. fill the prescription at the hospital's contract pharmacy. no new guidance or regulation with the goal that the patients

are the true beneficiaries of the program has been issued, do you have any reason to believe that hospitals have begun to pass these savings back to the uninsured. >> we worked closely with hrsa and let them know about these situations so they were able to address them as they thought appropriate. i don't know whether hrsa did reach out and talk to these hospitals about their current policies. >> so you know no indication either way that hospitals have begun to pass it back to the uninsured or they have not. >> that's correct. >> i yield back. thank you. thank you senator cassidy. senator smith. >> thank you chair alexander and ranking member murry. and to our testifiers today. i want so start by saying senator isackson i appreciate your candor in saying it's hard to figure out with what's going on with drug prices and who pays what? when? how much? why?

i wonder if that's by design rather than by accident.

to patient's needs. this is how we stretch -- there are three sources. could you just tell us a little bit about how you think these -- proposed changes would affect rural safety net hospitals. >> make sure i understand your question correctly, are you talking about the payment? >> yes. yes. also sort of these -- this emphasis on better kind of what additional regulatory burden might be placed. >> i think its important to address your issue about how they will affect hospitals. we will need to monitor that as the implementation rules out and see whether or not the savings blocks those cuts in anyway. i any terms of of the burden you are also addressing that also needs to be taken in consideration. obviously the inspector general is all for greater program

integrity and greater transparency. -- >> right. i think this gets me to the question of -- sort of transparency for whom and who you does it work and -- senator collins got to this a little bit and i also think senator murray did. i mean -- i'm -- sort of -- stunned understanding how much drugs are costing. people don't know. to the people who are paying for them. its sort of like saying -- i'm going to go and buy a car but i don't know how much this is costing and i also don't know whether the person standing right next to me is buying the same car and is paying more or less. isn't that fundamental problem? what is the impact you think of

the -- not moving forward on the proposed improvements that the trump administration has been holding back. what is the impact on that on the prices that people are actually paying do you think? >> what u.k. refer to -- i can refer back to is a report we did in 2005. of the total purchases 14% of them were over the mandated price which resulted in $3.9 million in overcharges for that month. we have evidence that over charging has taken place. >> that was one month in 2005. well -- today's hearing is one 340 b program which is important and place an important role in making sure people can getting access to prescription drugs and quality health care at the same

time. i hope in this conversation we don't lose sight of the central problem we have which is the prescription drug prices are too high. people in my state and all over the country are choosing to between buying the medicine that they need and other essential parts of their life. paying -- i hear these stories all the time. while i'm grateful, i'm glad the president says he wants to tackle these challenges. i hope we can find some common ground. i also agree i don't through the prose polls that were laid out last week -- proposal that's were laid out last week get to the core problem. the pharmaceutical company stock prices went up after the president made this announcement. at the same time we have issues with big drug companies. these are the issues think are deeply concerning that we need to get to the bottom of.

thank you. >> thing you, senator smith. during our first hearing on 340-b it became obvious there was some disagreement about data. let me ask you three or four questions. if you don't have answer right at hand maybe you could provide them to me after the hearing. the office of assistant sec daughter of planning and evaluation estimates americans spend $457 billion on prescription drugs in 2015. is that $457 billion accurate for 2015? >> my understanding that is accurate for sales. >> for sale. would you may --

>> as opposed to net revenue. >> okay so overall sales. according to -- of that $457 billion, approximately $12 billion was spent on 340-b drugs. does that sound correct? >> i think that is what they have reported as well. that was pre-discount i believe. >> correct. >> back on 2015, if it were $12 billion spent, on 340-b drugs that was an estimated $6 billion in savings and hospitals and clinics. does the figure sound right? >> it does, yes. >> so using those numbers, $12 billion out of $457 billion, that about 2.6%. that would mean in 2015 the

purchase of 340-b drugs were about 2.6% of the total drug purchases in the country, correct? >> correct. >> according to them, this is looking at the next year. 340-b sales were about $16 billion -- does that sound correct? >> yes. >> that would suggest that in one year sales in the 34046 b program increased by about 33%. according to the government accountability office, hospitals, clinics and affiliates participating in the program nearly doubled twr about 20,000 in 2014 to 40,000 in 2017. is that correct? >> yes. over the past five years hospital coverage sites

increased 175% and federal grantees sites increased about 40%. the growth is really primarily -- disproportion ate. >> would you both agree it would be hard for us to do anything else until we clarify the intent of the program? >> i think clarifying the intent of the program would go a long way to establishing what the -- guidance needs to be and it will help create -- then the guidance needs to happen to create the transparency and the -- enhancing -- right now there is a lot as to what the program rules are. >> i would agree. clarity in the program goal as well as clear program rules are the foundation of the strong program integrity strike -- strategy. >> in our previous hearing it was clear that -- that -- we could not tell in all instances on what the covered entities

were spending their money and -- and other conversations since then i've had hospitals say -- we are glad to tell you and so -- is it true that -- because of the ways clinics are supervised that we know more about how they spend their money than we do hospitals? or is there any reason why we shouldn't ask them to tell us how they spend this $6 billion? if it goes to help individual patients reduce the price of a specific drug. that is one thing. if it goes for some other much which it could and it does, it may be a worthy purpose ux, that is another thing -- purpose, that is another thing. >> that's not a requirement of the program. for some of the federal grantees, their grant requirements may require them to spend the money in a certain

way. >> as matter of policy, it doesn't require that but -- it would seem to me it would be -- we could do a better job of over sight if we knew that. >> i think its somewhat -- is dependant on the entity or what other systems they have to put in place to monitor that. i think its something that certainly should be explored. i think this is another issue that -- there will always be questions about the integrity of the program if that information is not available. >> we are not clear about the intent of the program. that information isn't available. it makes it difficult to -- to over sight. >> i was going to say people have a lot of interpretations of what the intent of the program is. that is not consistent with what the intent that -- the stated

intent is. its -- that is not explicit in the intent. i think -- creating -- deciding what the intent of the program will go a long way to really helping with creating the necessary guidance and regulations that are needed for the program. >> thank you very much. i run over my time. senator warren. >> thank you, mr. chairman. the 340-b program has one basic requirement. federal law applies to formal used to calculate this discounted price which is called the stealing price. in order for the program to work, the ceiling price calculations need to be done correctly. there need to be consequences

when drug companies break the law and deliberately overcharge for these drugs. let me start there. in 2011 the gao raised concerns that the 340-b program quote primarily relies on self policing that is participants ensuring their own compliance with program requirements. tell me -- why might it be a problem if a drug company is the only one doing these ceiling price calculations and no one is able to check its work in. >> on the entity part that they -- the prices are not available to them, so they don't know what their -- the self policing only works if you have transparency, the information you need. but -- the information is not available to covered entities, on the other end with the --

drug manufacturers, they may -- but the burden -- they have the authority to audit a covered entity but there are a lot of burdens associated with that. its just overall lack of transparency. >> i want to start with the -- just how the program is set up to begin with. when it comes to these drug companies, if no one can check their work, they can cheat, charge more for drugs and no one could catch them when they break the law. there is no way to catch them on this intent. senator smith started on this issue. let me ask another part of this, the oig has conducted numerous analysis of 340-b prices, is there evidence that drug companies have overcharged health care providers in the 340-b programs? >> yes, there is evidence. >> so these findings led congress to include a provision in the affordable care act to

crack down on this behavior. the aca required the government to create a verification system for ceiling prices and make sure the hospitals and clinics got refunds if the drug companies overcharge them. congress also established fines called civil monetary penalties that drug companies could be charged if they knowingly and intentionally overcharge a health care provider. how many penalties have you assessed to date? >> we have received no referrals. we don't anticipate receiving them till the rule is made effective. >> right now you have not received any referrals and the reason you have not received any referral social security because the trump administration has

already delayed the implementation of these penalties, not once, not twice, not three times but four separate times since 2017 and just last week they proposed yet a fifth delay. when president trump delivered his big drug pricing speech last week, he said the 340-b program, a drug discount program, contributes to the problem of higher drug prices. and that is one of the parts of this speech where the -- drug industry lobbyists splus stood up and cheered. if the president is truly worried about the connection between high drug prices and the 340-b program, he could start by implementing the law that congress wrote to actually stop drug companies from cheating on their discounts. no one should be above the law and that includes giant drug companies that are raking in profits while complaining about

program that helps out our most vulnerable patients. >> thank you. >> thank you, senator warren. senator baldwin. >> thing you, mr. chairperson. i have long worked with a group of bipartisan colleagues in the senate to protect and strengthen the 340-b program. in 2013 we called on hhs to consider recommendations from a 2011 gao report. however the administration continues to delay any real action to up chance program operations for all participants and instead has continued to unfairly single out and target hospitals. aurora in downtown milwaukee is one of our 71 hospitals that

relies on the 340-b program to care for its uniquely vulnerable population. aurora estimates over 8,000 of it's patients have undiagnosed hepatitis b. with over 37,000 undiagnosed cases in the state. they have used their 340-b savings to develop a screening program and to partner with the city health department a local clinic and a near but community health center to improve community health and better address hep c. aurora resent liz shared their frustrations with regular instances where drug companies refused to provide them with 340-b -- the 340-b price of a drug. often the manufacturer will provide no excuse at all or they

will claim that the drug is in short supply. this forces the hospital to buy the needed medication at full cost at which point the drug is no longer in short supply. ga objection recommended they clarify guidance, prevent drug companies from restricting distribution of drugs at 340-b prices. while the agency released clarification, hospitals in wisconsin continue to experience these problems. dr. draper, what additional work do you plan to do to examine instances where drug manufactures refuse to provide the 340-b price and what other over sight measures could help address this? >> we don't currently have work underway or have any plan work related to that. however, that's an over sight issue and if the hospitals are experiencing that they need to

work with them to resolve the issue. that was something that we found in our work that led up to the 2011 report that manufactures that drugs that were in short supply that they often -- restricted distribution in a way that wasn't always clear between 340-b and non340-b hospitals. i think hospitals need to work with them to resolve that issue because that should not be happening in accord answer with their updated guidance. >> okay. many wisconsin 340-b hospitals have also told me about numerous audits that they experienced. not only from their own internal and rigorous self auditing but also from the audits as well as audits by the drug companies. your agencies have recommended

increasing over sight of drug manufactures including increasing audits traps -- transparency as we as dispute process for eptties to better obtain information from manufactures. i'm concerned then even playing field between hospitals and drug companies continues to persist burden inning hospitals in the program. can you explain why your agencies recommended enhanced drug manufacture over sight such as audits and what gaps remain that the administration has failed to address? >> with respect to our work the gaps that remain are the visibility into the prices. right now providers and states do not know what the prices are. at this point they just pay what they are charged. we have evidence from previous work that there are over charges

that occur. we strongly encourage them to share the prices with the provider and with states. >> currently we encourage over sight of all entities participating in the program. they now conduct about 200 audits of covered entities each year. earlier i had talked about the -- its not a systematic process for manufactures in 2015. they did one -- manufacture audit each year in 2016 and 2017 they did five. there is -- we would encourage that there is a process that to ensure all participants in the program are adhering for the program and rules and that there

is greater transparency. >> thank you chlt. you had some questions which you may want to follow up on. the hearing record will remain open for ten days. members may submit additional innews for the record within that time they would like -- information for the record within the time they would like. thank you for being here. the committee will stand adjourned. connect with c-span to personalize the information you get from us. the program guide is a daily e-mail with the most updated prime time schedules and upcoming live coverage. the book tv news letter september weekly is an insider's look at upcoming offers and book

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officials give their thoughts on privacy, the law and government surveillance issues in particular how a new law on overseas cloud data store damage help law enforcement in criminal investigations. the international association of privacy professionals hosted. its an hour long global privacy event in washington. welcome to all of you. we are -- honored to be skroined by two senior doj officials andly have them introduce themselves in a moment. for the first 40 or 45 minutes i will be basically be questioning them and walking through some of th