Support Safety Net Providers Through the 340B Program

The Deficit Reduction Act (DRA), signed into law on February 8, 2006, includes a provision that unintentionally adversely affects Planned Parenthood’s long-standing ability to purchase contraceptives at a discounted (that is, nominal) price.   This provision went into effect on January 1, 2007, and is having a devastating fiscal impact on approximately one-quarter of our health centers and their approximately 500,000 patients.  Because of the unintended consequences of the DRA and the Bush administration’s failure to use the discretion in the DRA to define safety net providers as a category eligible to receive nominally priced drugs, it is imperative that certain safety net providers become covered entities under the 340B Drug Pricing Program.

The 340B Program Was Developed to Help Safety Net Providers Serve Low-Income People

The 340B Drug Pricing program  was created through the Veterans Health Care Act of 1992, P.L. 102-585.  Congress established the program to limit the cost of outpatient pharmaceutical drugs paid by safety net providers.  The law requires pharmaceutical manufacturers participating in the Medicaid program to provide discounts on covered outpatient drugs purchased by “covered entities” of the program (those safety net providers designated by the 340B program statute to receive the discounts).   The 340B discount price (also called the “340B price” or “PHS price”) is a ceiling price that is based, in part, on Average Manufacturer Price (AMP) and Medicaid drug rebates.   Because it is a ceiling price, 340B covered entities can — and do — negotiate even deeper discounts.

All told, the program serves as an important foundation for designated safety net providers, which rely on the significantly reduced prices to stretch scarce dollars to ensure that low-income, uninsured, and underinsured Americans have access to affordable, quality health care.

Safety Net Providers Must be Able to Purchase Discounted Drugs

More than 12,000 entities, including the vast majority of family planning safety net providers, currently qualify for reduced-price drugs under 340B.   Unfortunately, some key safety net providers, including certain family planning health centers, do not qualify for 340B reduced drug prices even though they provide the same or similar services to the same population as do 340B covered entities.  The only difference between these health centers and 340B eligible centers is that they do not receive certain federal funding.

This oversight is extremely damaging now that these entities are no longer able to receive nominal prices from pharmaceutical companies since passage of the DRA.  As a result, these safety net providers have been left with dramatically increasing drug costs (as much as 10-fold) and are struggling to survive.

To redress the unintended consequences of the DRA, the Public Health Service Act must be amended to include key safety net providers who have survived without federal dollars, in part, by receiving deeply discounted drug prices.  Absent this technical correction, many of these providers will be forced to reduce services or close their doors altogether — further undermining a health care safety net already straining at the seams.

For more information, please contact Planned Parenthood’s Government Relations Department at 202-973-4848.