[House Hearing, 115 Congress]
[From the U.S. Government Publishing Office]



 
      EXAMINING HRSA'S OVERSIGHT OF THE 340B DRUG PRICING PROGRAM

=======================================================================

                                HEARING

                               BEFORE THE

              SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS

                                 OF THE

                    COMMITTEE ON ENERGY AND COMMERCE
                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED FIFTEENTH CONGRESS

                             FIRST SESSION

                               __________

                             JULY 18, 2017

                               __________

                           Serial No. 115-46
                           
                           
                           
                           
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                    COMMITTEE ON ENERGY AND COMMERCE

                          GREG WALDEN, Oregon
                                 Chairman
JOE BARTON, Texas                    FRANK PALLONE, Jr., New Jersey
  Vice Chairman                        Ranking Member
FRED UPTON, Michigan                 BOBBY L. RUSH, Illinois
JOHN SHIMKUS, Illinois               ANNA G. ESHOO, California
TIM MURPHY, Pennsylvania             ELIOT L. ENGEL, New York
MICHAEL C. BURGESS, Texas            GENE GREEN, Texas
MARSHA BLACKBURN, Tennessee          DIANA DeGETTE, Colorado
STEVE SCALISE, Louisiana             MICHAEL F. DOYLE, Pennsylvania
ROBERT E. LATTA, Ohio                JANICE D. SCHAKOWSKY, Illinois
CATHY McMORRIS RODGERS, Washington   G.K. BUTTERFIELD, North Carolina
GREGG HARPER, Mississippi            DORIS O. MATSUI, California
LEONARD LANCE, New Jersey            KATHY CASTOR, Florida
BRETT GUTHRIE, Kentucky              JOHN P. SARBANES, Maryland
PETE OLSON, Texas                    JERRY McNERNEY, California
DAVID B. McKINLEY, West Virginia     PETER WELCH, Vermont
ADAM KINZINGER, Illinois             BEN RAY LUJAN, New Mexico
H. MORGAN GRIFFITH, Virginia         PAUL TONKO, New York
GUS M. BILIRAKIS, Florida            YVETTE D. CLARKE, New York
BILL JOHNSON, Ohio                   DAVID LOEBSACK, Iowa
BILLY LONG, Missouri                 KURT SCHRADER, Oregon
LARRY BUCSHON, Indiana               JOSEPH P. KENNEDY, III, 
BILL FLORES, Texas                       Massachusetts
SUSAN W. BROOKS, Indiana             TONY CARDENAS, California
MARKWAYNE MULLIN, Oklahoma           RAUL RUIZ, California
RICHARD HUDSON, North Carolina       SCOTT H. PETERS, California
CHRIS COLLINS, New York              DEBBIE DINGELL, Michigan
KEVIN CRAMER, North Dakota
TIM WALBERG, Michigan
MIMI WALTERS, California
RYAN A. COSTELLO, Pennsylvania
EARL L. ``BUDDY'' CARTER, Georgia

              Subcommittee on Oversight and Investigations

                        TIM MURPHY, Pennsylvania
                                 Chairman
H. MORGAN GRIFFITH, Virginia         DIANA DeGETTE, Colorado
  Vice Chairman                        Ranking Member
JOE BARTON, Texas                    JANICE D. SCHAKOWSKY, Illinois
MICHAEL C. BURGESS, Texas            KATHY CASTOR, Florida
SUSAN W. BROOKS, Indiana             PAUL TONKO, New York
CHRIS COLLINS, New York              YVETTE D. CLARKE, New York
TIM WALBERG, Michigan                RAUL RUIZ, California
MIMI WALTERS, California             SCOTT H. PETERS, California
RYAN A. COSTELLO, Pennsylvania       FRANK PALLONE, Jr., New Jersey (ex 
EARL L. ``BUDDY'' CARTER, Georgia        officio)
GREG WALDEN, Oregon (ex officio)

  
                             C O N T E N T S

                              ----------                              
                                                                   Page
Hon. Tim Murphy, a Representative in Congress from the 
  Commonwealth of Pennsylvania, opening statement................     1
    Prepared statement...........................................     3
Hon. Diana DeGette, a Representative in Congress from the state 
  of Colorado, opening statement.................................     4
Hon. Greg Walden, a Representative in Congress from the State of 
  Oregon, opening statement......................................     6
    Prepared statement...........................................     8
Hon. Frank Pallone, Jr., a Representative in Congress from the 
  State of New Jersey, opening statement.........................     9

                               Witnesses

Capt. Krista M. Pedley, PHARMD, MS, Director, Office of Pharmacy 
  Affairs, Health Resources and Services Administration, U.S. 
  Department of Health and Human Services........................    11
    Prepared statement...........................................    14
    Answers to submitted questions...............................    96
Erin Bliss, Assistant Inspector General, Office of Evaluation And 
  Inspections, Office of Inspector General, U.S. Department of 
  Health and Human Services......................................    20
    Prepared statement...........................................    22
    Answers to submitted questions...............................   102
Debra Draper, Director, Health Care, Government Accountability 
  Office.........................................................    31
    Prepared statement...........................................    33

                           Submitted Material

Subcommittee memorandum..........................................    82


      EXAMINING HRSA'S OVERSIGHT OF THE 340B DRUG PRICING PROGRAM

                              ----------                              


                         TUESDAY, JULY 18, 2017

                  House of Representatives,
      Subcommittee on Oversight and Investigations,
                          Committee on Energy and Commerce,
                                                    Washington, DC.
    The subcommittee met, pursuant to call, at 10:18 a.m., in 
room 2322 Rayburn House Office Building, Hon. Tim Murphy 
(chairman of the subcommittee) presiding.
    Present: Representatives Murphy, Griffith, Burgess, Brooks, 
Collins, Barton, Walberg, Walters, Costello, Carter, Walden (ex 
officio), DeGette, Schakowsky, Castor, Tonko, Clarke, Ruiz, 
Peters, and Pallone (ex officio).
    Staff present: Ali Fulling, Legislative Clerk, Oversight 
and Investigations; Brighton Haslett, Counsel, Oversight and 
Investigations; Brittany Havens, Professional Staff, Oversight 
and Investigations; Katie McKeogh, Press Assistant; Jennifer 
Sherman, Press Secretary; Alan Slobodin, Chief Investigative 
Counsel, Oversight and Investigations; Sam Spector, Policy 
Coordinator, Oversight and Investigations; Josh Trent, Deputy 
Chief Health Counsel, Health; Natalie Turner, Counsel, 
Oversight and Investigations; Christina Calce, Minority 
Counsel; Jeff Carroll, Minority Staff Director; Chris Knauer, 
Minority Oversight Staff Director; Miles Lichtman, Minority 
Policy Analyst; Kevin McAloon, Minority Professional Staff 
Member; Rachel Pryor, Minority Senior Health Policy Advisor; 
and C. J. Young, Minority Press Secretary.

   OPENING STATEMENT OF HON. TIM MURPHY, A REPRESENTATIVE IN 
         CONGRESS FROM THE COMMONWEALTH OF PENNSYLVANIA

    Mr. Murphy. Good morning.
    Today's Subcommittee on Oversight and Investigation is 
holding a hearing entitled, ``Examining HRSA's Oversight of the 
340B Drug Pricing Program.'' The 340B program was created by 
Congress in 1992 and mandates that drug manufacturers provide 
outpatient drugs to eligible entities at reduced prices in 
order for the manufacturers to remain eligible for 
reimbursement through entitlement programs such as Medicaid and 
Medicare.
    Now, the 340B program covers entities, which are like 
hospitals and other nonprofit health care organizations, that 
have certain federal designations or receive funding from 
specific federal programs. They are eligible for the 340B 
program by receiving certain federal grants administered by 
different agencies within HHS. Hospitals eligible for the 340B 
program include certain disproportionate share hospitals, 
children's hospitals, freestanding cancer hospitals, rural 
referral centers, sole community hospitals, and critical access 
hospitals.
    The Health Resources and Services Administration, or HRSA, 
an agency in the U.S. Department of Health and Human Services 
is tasked with accepting applications and overseeing the 
covered hospitals and clinics.
    HRSA faces several challenges in conducting oversight of 
the 340B program, one of which is the lack of reporting 
requirements in the 340B statute. Participating hospitals save 
between 25 to 50 percent of the average wholesale price for 
covered outpatient drugs. They saved $6 billion on drug 
expenditures in fiscal year 2016, according to the HHS Office 
of Inspector General estimates. Hospitals are not required to 
report their annual savings through participation in the 
program or how they use the money saved.
    For many of these covered entities, those savings are vital 
to the entities' survival, particularly those that serve a 
large percentage of indigent patients and operate at a loss 
each year. Other entities reinvest those savings in patient 
care, expanding access to patient care by opening centers in 
rural and underserved areas or passing along the savings to 
patients by providing discounted drugs. However, as with so 
many federal programs, there are instances of errors and 
misuse.
    Specialists, oncologists in particular, have told stories 
to us of their grave concerns about the way some entities use 
the 340B program. For example, one store involves a doctor who 
referred many uninsured young breast cancer patients to a 340B 
hospital to receive cancer treatments but watched as 16 of 
those patients were placed on a wait list for care, simply 
waiting for treatment while their cancer progressed from 
entirely treatable to potentially life threatening. According 
to this doctor, the wait list was not due to an overall 
capacity issue. Instead, it was because the hospital simply 
chose to set a cap on the number of uninsured patients they 
would treat.
    I hope that instances like this are outliers--the exception 
to the rule. The integrity of the 340B program must be 
protected. HRSA must be able to conduct oversight in a way that 
allows it to uncover fraud and noncompliance. Indeed, HRSA 
audits from fiscal year 2012 to fiscal year 2016 demonstrate 
that noncomplying entities violate program requirements through 
duplicate discounts, diversion to ineligible patients and 
facilities, and incorrect database reporting. Unfortunately, 
while HRSA has made improvements to their oversight efforts in 
recent years, the agency simply may not have the resources to 
adequately safeguard the program.
    The program has experienced dramatic growth in recent 
years, due in part to program expansions in the patient 
protections in the Affordable Care Act. At a hearing before the 
Health subcommittee in 2015 we learned that from 2001 to 2011 
the number of covered entities participating in the program 
roughly doubled. The most recent data shows that from 2011 to 
2017 the number of entities has nearly quadrupled. HRSA 
indicates that as of October 2016, 12,148 covered entities were 
participating in the 340B program.
    Despite that growth, HRSA maintains only 22 staff to 
oversee the 340B program and conducts roughly 200 audits per 
year. While HRSA has increased the number of audits conducted 
annually, which the committee applauds HRSA for, that number is 
still dwarfed by the vast number of participating entities and 
manufacturers. Now, listen to this. At the current level of 
annual audits conducted, HRSA is auditing a mere 1.6 percent 
covered entities. That's 1.6 percent. That is all. Further, 
because HRSA's audits consist of only a sample of drugs within 
each entity, these audits cover just a fraction of a fraction 
of the program. Despite that, HRSA's audits have uncovered 
between 63 and 82 percent of audited entities to be 
noncompliant with program requirements since 2012. Needless to 
say, that is a concern. What would more intensive oversight 
including additional audits further reveal? What is the outcome 
if the hospital is found to be in noncompliance with diversion, 
duplication, or incorrect data?
    Well, nothing. No one has ever lost a 340B eligibility 
because of these problems. I thank HRSA for their cooperation 
for using audit documents before this hearing in response to 
the committee's request last month.
    We are in the process of reviewing these documents to gain 
a better understanding of the audit process and may have more 
follow-up questions at a later date.
    Now, I am a big supporter of the 340B program. I will 
continue to defend them. But I don't buy the argument that some 
have presented to me that says show me someone who got caught, 
because chances are 94 percent that no one is even going to 
look at you, and so you won't be audited, and 100 percent 
chance that nothing is going to happen afterwards. That is why 
we are here, to find out is there a concern or not a concern.
    And we welcome all the witnesses today too and look forward 
to hearing HRSA's oversight efforts, the challenges HRSA faces 
and how this committee can best enable HRSA to overcome these 
challenges.
    I now yield 5 minutes to Ms. DeGette.
    [The prepared statement of Mr. Murphy follows:]

                 Prepared statement of Hon. Tim Murphy

    Today, the subcommittee is holding a hearing entitled 
``Examining HRSA's Oversight of the 340B Drug Pricing 
Program.'' The 340B program was created by Congress in 1992 and 
mandates that drug manufacturers provide outpatient drugs to 
eligible entities at reduced prices in order for the 
manufacturers to remain eligible for reimbursements through 
entitlement programs such as Medicaid and Medicare.
    340B program-covered entities are nonprofit health care 
organizations that have certain federal designations or receive 
funding from specific federal programs. Federal grantees are 
eligible for the 340B program by receiving certain federal 
grants administered by different agencies within HHS. Hospitals 
eligible for the 340B program include certain Disproportionate 
Share Hospitals, children's hospitals, freestanding cancer 
hospitals, rural referral centers, sole community hospitals, 
and critical access hospitals.
    The Health Resources and Services Administration, or 
``HRSA,'' an agency in the U.S. Department of Health and Human 
Services, is tasked with accepting applications and overseeing 
covered entities.
    HRSA faces several challenges in conducting oversight of 
the 340B program, one of which is the lack of reporting 
requirements in the 340B statute. Participating entities save 
between 25-50 percent of the average wholesale price for 
covered outpatient drugs, and according to the HHS Office of 
Inspector General's estimates, covered entities saved $6 
billion on drug expenditures in Fiscal Year 2016. However, 
covered entities are not required to report their annual 
savings through participation in the program, or how they use 
the money saved.
    For many of these covered entities, those savings are vital 
to the entity's survival, particularly those that serve a large 
percentage of indigent patients and operate at a loss each 
year. Other entities reinvest those savings in patient care, 
expanding access to patient care by opening centers in rural 
and underserved areas or passing along the savings to patients 
by providing discounted drugs. However, as with so many federal 
programs, there are instances of errors and misuse.
    Specialists, oncologists in particular, have told me 
stories of their grave concerns about the way some entities use 
the 340B program. For example, one story involves a doctor who 
referred many uninsured, young breast cancer patients to a 340B 
hospital to receive cancer treatments, but watched as 16 of 
those patients were placed on a waitlist for care, simply 
waiting for treatment while their cancer progressed from 
entirely treatable, to potentially life-threatening. According 
to this doctor, the waitlist was not due to an overall capacity 
issue. Instead, it was because the hospital simply chose to set 
a cap on the number of uninsured patients they would treat.
    I hope that these instances are outliers--the exception to 
the rule. The integrity of the 340B program must be protected. 
HRSA must be able to conduct oversight in a way that allows it 
to uncover fraud and non-compliance. Indeed, HRSA audits from 
FY 2012 to FY 2016 demonstrate that non-complying entities 
violate program requirements through duplicate discounts, 
diversion to ineligible patients and facilities, and incorrect 
database reporting. Unfortunately, while HRSA has made 
improvements to their oversight efforts in recent years, the 
agency simply may not have the resources to adequately 
safeguard the program.
    The program has experienced dramatic growth in recent 
years, due in part to program expansions in the Patient 
Protection and Affordable Care Act. At a hearing before the 
Health Subcommittee in 2015, we learned that from 2001 to 2011, 
the number of covered entities participating in the program 
roughly doubled. The most recent data shows that from 2011 to 
2017, the number of entities has nearly quadrupled. HRSA 
indicates that as of October 2016, 12,148 covered entities were 
participating in the 340B program.
    Despite that growth, HRSA maintains only 22 staff to 
oversee the 340B program, and conducts roughly 200 audits 
annually. While HRSA has increased the number of audits 
conducted annually, which the Committee applauds HRSA for, that 
number is still dwarfed by the vast number of participating 
entities and manufacturers. At the current level of annual 
audits conducted, HRSA is auditing a mere 1.6% of covered 
entities annually. Further, because HRSA's audits consist of 
only a sample of drugs within each entity, these audits cover 
just a fraction of a fraction of the program. Despite that, 
HRSA's audits have uncovered between 63 and 82 percent of 
audited entities to be non-compliant with program requirements 
since 2012. What would more intensive oversight, including 
additional audits, further reveal?
    I thank HRSA for their cooperation in producing audit 
documents before this hearing in response to the Committee's 
request last month. We're in the process of reviewing these 
documents to gain a better understanding of the audit process 
and may have more follow-up questions at a later date.
    I welcome the witnesses appearing before us today and look 
forward to hearing about HRSA's oversight efforts, the 
challenges HRSA faces, and how this committee can best enable 
HRSA to overcome those challenges.

 OPENING STATEMENT OF HON. DIANA DEGETTE, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF COLORADO

    Ms. DeGette. Thank you so much, Mr. Chairman.
    Mr. Chairman, Congress created the 340B drug discount 
program 25 years ago to help safety net providers leverage 
their scarce resources to serve more people, especially people 
in low-income and vulnerable areas. Thanks to this program, 
providers across the country have been able to purchase 
discounted pharmaceuticals and expand and improve their 
services.
    I think we can stipulate that 340B is critical to provide 
critical medical services to low-income people. But we also can 
stipulate that we need to make sure that our oversight remains 
robust.
    340B drug discounts allow eligible hospitals and other 
designated providers including community health centers, state 
and local health departments and family clinics to make the 
most of their limited resources. But as the Government 
Accountability Office and the HHS Office of Inspector General 
have found, there is a need for more oversight of this 
important program to ensure that it achieves its critical 
mission.
    GAO and OIG have conducted several reviews of the 340B 
program and have repeatedly underscored that it needs more 
effective oversight. Of course, to conduct that oversight, HRSA 
must have the tools it needs to implement better controls over 
the program. These tools may require additional authority from 
Congress, which I would like to explore today, and also, given 
the size of the agency, if you want more robust oversight you 
are going to have to give more funding.
    I also want to point out, Mr. Chairman, that I am troubled 
by the rule that the Centers for Medicare and Medicaid proposed 
last week which would dramatically reduce reimbursements to 
Medicare Part B drugs for 340B hospitals. The Trump 
administration claimed that this proposed rule was an important 
step to lower the cost of drugs to the American people. 
Unfortunately, that statement seems more fantasy than reality.
    The proposed rule will do nothing to achieve the goal of 
making prescription drugs more affordable to the general 
population. Reducing the repayment rate that 340B hospitals 
receive for Medicare Part B drugs does nothing to get to the 
root of high drug prices, and frankly, it tries to solve one 
problem by creating many others. Rather than rolling up its 
sleeve and attempting to address the actual cost of high drug 
prices, the administration's proposed rule instead threatens to 
undermine the important safety net mission of 340B hospitals.
    Many 340B hospitals are what are called disproportionate 
share safety net hospitals--the DSH hospitals. This means they 
often serve low-income and rural communities and take on 
patients other parts of the health care system either cannot or 
will not impact. In my district in Denver, Colorado, we have a 
number of these DSH hospitals including St. Joseph Hospital, 
which is a part of SCL Health, and SCL Health operates six 
other 340B hospitals and provides essential often uncompensated 
care which 340B drug discounts have helped to fund.
    Now, the reduced payment rate pulls the rug out from under 
providers like St. Jo's and puts the patients they serve at 
risk of losing access to care. As you know, Mr. Chairman, many 
of my colleagues and I have asked this subcommittee to open an 
investigation into why drug prices are so high and how we can 
address this problem.
    I think we need a robust investigation and a series of 
hearings that explore in-depth the reasons for exorbitant costs 
of drugs and why the prices continue to rise.
    Unfortunately, I don't think this hearing nor the rule 
proposed by CMS last week addresses the broad problem of high 
drug prices. I know that all of us are dedicated to ensuring 
that the 340B program achieves its critical mission of helping 
providers serve the indigent. I want to make sure, like you do, 
that sound controls are in place to prevent abuse.
    And, Mr. Chairman, while I am glad to work with you to 
address some of the problems of the 340B program, the concerns 
associated with it are fundamentally separate from the high 
cost of drugs in the U.S. and I believe the issue should be 
treated differently. Put simply, the committee should hold 
hearings, we should take meaningful action on the high cost of 
drugs and the rising costs. In the meantime, I look forward to 
hearing from the witnesses today about what we can to do 
strengthen our safety net and to improve HRSA's oversight of 
the 340B program.
    With that, I yield back. Thanks.
    Mr. Murphy. The gentlelady yields back.
    I now recognize the chairman of the full committee, Mr. 
Walden.

  OPENING STATEMENT OF HON. GREG WALDEN, A REPRESENTATIVE IN 
               CONGRESS FROM THE STATE OF OREGON

    Mr. Walden. Thank you, Mr. Chairman, for this hearing. The 
committee is already ramped up its top to bottom oversight of 
many aspects of the cost drivers in our health care system and 
we have more work to do.
    The subcommittee's hearing on 340B drug pricing program and 
the oversight role of the Health Resources and Services 
Administration, or HRSA, is part of this broader review and we 
appreciate our witnesses here today.
    Since its creation by Congress in 1992, the 340B drug 
pricing program has provided lifesaving medicines at reduced 
prices to certain safety net health care providers. Indeed, 
this program has helped these providers, known as covered 
entities, stretch scarce federal dollars as far as possible to 
better serve uninsured and under insured patients across the 
country. HRSA estimated that in 2015 covered entities saved 
about $6 billion on 340B drugs through their participation in 
the program.
    For a variety of reasons, participation by hospitals in the 
340B program has grown substantially in recent years and the 
number of unique hospital organizations participating in the 
program has nearly quadrupled from 2011 to 2016, increasing 
from 3,200 participating hospitals in 2011 to 12,148 as of 
October of 2016.
    Now, with this growth concerns have been raised about 
HRSA's ability to adequately oversee this program, as the 
witnesses from HHS Inspector General's office and GAO will 
discuss in detail today. HRSA's oversight of the program has 
improved in recent years through enhanced authority and 
resources but program vulnerabilities still exist. So today we 
will examine a number of important programmatic issues.
    First, we want to learn how HRSA's oversight efforts can 
best meet the challenges of 340B growth. While HRSA has made 
improvements to its oversight efforts in recent years, HRSA's 
audit activities remain at or below 200 annual audits of 
covered entities since 2012, despite the rapid growth of the 
program. That is one reason we are here today. That is to 
answer the question: How can HRSA improve its audits to better 
detect problems or somehow raise the annual number of audits?
    Next, we will focus on the problems already discovered and 
how HRSA can address them. HRSA's annual audits reveal a high 
level of noncompliance with program requirements by covered 
entities including the potential for duplicate discounts and 
diversion of 340B drugs to ineligible patients.
    We will also want to find out how HRSA can be more 
transparent. Lack of transparency hinders HRSA's oversight 
capabilities, and while the purpose of the program is to 
stretch scarce resources as far as possible, reaching more 
eligible patients, and providing more comprehensive services, 
neither 340B nor HRSA guidance explains how 340B providers must 
use savings from the program. That is an issue that has come to 
our attention.
    Finally, we need to discuss how HRSA's lack of regulatory 
authority limits the agency's ability to adequately oversee the 
program.
    So the committee has been reviewing HRSA's oversight of the 
340B program for pricing for 2 years and we plan to continue 
this work after this hearing.And as we move forward it is 
important not to overreact and create unnecessary red tape for 
providers who are truly using the program to benefit patients. 
And I have heard from hospitals in my district like those in 
Bend and even down on the south coast outside of my district 
just how important this program is to patients. While we do not 
want to overburden these safety net providers, we also need 
robust oversight over a program that has expanded this 
dramatically.
    Just last month, the committee sent a letter the HRSA to 
gain more insight into the audits conducted in the 340B program 
and we want to extend our appreciation to HRSA for their timely 
production of information responsive to our requests. Thank you 
for doing that and we look forward to hearing about the steps 
that HRSA's taking to strengthen the program.
    I also want to thank the Office of Inspector General at the 
U.S. Department of Health and Human Services and the GAO for 
your good work as well.
    With that, I yield the balance of my time to the chairman 
of the Subcommittee on Health, Dr. Burgess.
    Mr. Burgess. Thank you, Mr. Chairman, and thank you, Mr. 
Chairman, for holding this hearing today.
    As Chairman Walden pointed out, this program has saved 
billions of dollars for patients, ensuring that those in need 
could receive care and that the hospitals that provide that 
care can continue to support their communities.
    But the program has challenges and audits by HRSA have 
found high levels of noncompliance among 340B-covered entities, 
raising questions as to who is currently overseeing the program 
and who should provide that oversight, going forward.
    So I also want to thank our witnesses for being here today 
and discussing this very important program with us. This is a 
multifaceted problem.
    The way forward isn't entirely clear but that is what this 
hearing is to sort out. So I am grateful we are having the 
hearing today and look forward for an opportunity to examine 
the 340B landscape, going forward.
    And I yield back.
    [The prepared statement of Mr. Walden follows:]

                 Prepared statement of Hon. Greg Walden

    Thank you, Mr. Chairman, for this hearing. This committee 
has really been ramping up its top-to-bottom oversight of many 
aspects of our health care system. The subcommittee's hearing 
on the 340B drug pricing program and the oversight role of the 
Health Resources and Services Administration, or HRSA, is part 
of this broader overview.
    Since its creation by Congress in 1992, the 340B drug 
pricing program has provided life-saving medicines at reduced 
prices to certain safety-net health care providers. Indeed, 
this program has helped these providers known as ``covered 
entities'' stretch scarce federal dollars as far as possible to 
better serve uninsured and underinsured patients across the 
country. HRSA estimated that, in 2015, covered entities saved 
about $6 billion on 340B drugs through their participation in 
the program.
    For a variety of reasons, participation by hospitals in the 
340B program has grown substantially in recent years. The 
number of unique hospital organizations participating in the 
program has nearly quadrupled from 2011 to 2016-increasing from 
3,200 participating hospitals in 2011 to 12,148 in October 
2016.
    With this program growth, concerns have surfaced about 
HRSA's ability to adequately oversee the program. As the 
witnesses from the HHS Inspector General's office and GAO will 
discuss in detail today, HRSA's oversight of the program has 
improved in recent years through enhanced authority and 
resources, but program vulnerabilities still exist. Today, we 
will examine a number of important programmatic issues:
     First, we want to learn how HRSA's oversight 
efforts can best meet the challenge of 340B program growth. 
While HRSA has made improvements to its oversight efforts in 
recent years, HRSA's audit activity has remained at or below 
200 annual audits of covered entities since 2012 despite the 
rapid growth of the program. That's one reason we are here 
today--to answer the question: how can HRSA improve its audits 
to better detect problems or somehow raise the annual number of 
audits?
     Next, we will focus on the problems already 
discovered and how HRSA can address them. HRSA's annual audits 
reveal a high level of noncompliance with program requirements 
by covered entities, including the potential for duplicate 
discounts and diversion of 340B drugs to ineligible patients.
     We will also want to find out how HRSA can be more 
transparent. Lack of transparency hinders HRSA's oversight 
capabilities. While the purpose of the program is to ``stretch 
scarce resources as far as possible, reaching more eligible 
patients and providing more comprehensive services,'' neither 
the 340B statute nor HRSA guidance explains how 340B providers 
must use savings from the program.
     Finally, we will discuss how HRSA's lack of 
regulatory authority limits the agency's ability to adequately 
oversee the program.
    The committee has been reviewing HRSA's oversight of the 
340B drug pricing program for over two years, and plans to 
continue this work after the hearing. As we move forward, it's 
also important not to overreact and create unnecessary red tape 
for providers who are truly using the program to benefit 
patients. I've heard from hospitals in rural areas, like those 
in my district, that use 340B discounts to help beneficiaries 
in underserved parts of the country. While we do not want to 
overburden these safety-net providers, we also need robust 
oversight in the program to determine where these scarce 
federal dollars are going.
    Just last month, the committee sent a letter to HRSA to 
gain more insight into the audits conducted into the 340B 
program, and we want to extend our appreciation to HRSA for 
their timely production of information responsive to our 
requests. We look forward today to hearing from HRSA about the 
steps that they have taken to strengthen the program and the 
challenges they face in their efforts to oversee the program.
    I also want to thank the Office of Inspector General at the 
U.S. Department of Health and Human Services and the Government 
Accountability Office for being here to discuss their important 
work on this topic too. We look forward to hearing their 
recommendations on how to best promote program integrity and 
improve the program.

    Mr. Murphy. Gentleman yields.
    I now recognize the ranking member of the full committee, 
Mr. Pallone, for an opening statement for 5 minutes.

OPENING STATEMENT OF HON. FRANK PALLONE, JR., A REPRESENTATIVE 
            IN CONGRESS FROM THE STATE OF NEW JERSEY

    Mr. Pallone. Thank you, Mr. Chairman.
    Twenty-five years ago, Congress passed bipartisan 
legislation establishing the 340B program. Since its inception, 
the 340B program has played a critical role in ensuring that 
low-income and vulnerable individuals have access to affordable 
health care.
    The 340B program provides discounts on outpatient drugs 
that have allowed safety net providers to be able to expand 
access to essential health care services for vulnerable 
patients. This program has been vital for safety net providers 
like community health centers, inner city and rural hospitals, 
HIV clinics, and hemophilia treatment centers. And the 340B 
program has made the difference between patients getting the 
lifesaving health care services and drugs they need or going 
without.
    The Congress created this program with the intention of 
helping covered entities expand their capacity to serve their 
patients. By purchasing drugs at a discounted rate, 340B 
providers are able to stretch scarce resources to provide more 
comprehensive health services. Resources provided through the 
340B program directly augment patient care throughout the 
country. It continues to support the mission of safety net 
providers that serve low-income, uninsured, and under insured 
patients. And the 340 program is a critically important health 
care program and the Health Resources and Service 
Administration, or HRSA, should have the authority it needs to 
strengthen the integrity of the program.
    GAO and OIG have identified weaknesses in the oversight of 
the program which can have negative consequences for both the 
participating providers and drug manufacturers. HRSA should 
appropriately improve program integrity while protecting the 
mission of the 340B program and be given the necessary 
resources to oversee the program.
    Last Congress, this committee worked on a bipartisan basis 
to try to address the concerns from stakeholders on all sides 
of this issue in a balanced and measured fashion. Our goal was 
to strengthen and support the mission of 340B to provide health 
services to those most in need. Unfortunately, we were not 
successful. But I continue to believe and I think we can all 
agree here today that the mission of this program is sound and 
the continued emphasis on program integrity will make the 340B 
program stronger now and in the coming years.
    I want to be clear, however, that while I was always happy 
to have a conversation about strengthening the 340B program, it 
would be disingenuous for anyone on this committee to say that 
this hearing today is in any way a hearing on rising drug 
prices. The 340B program is not the problem or the solution to 
rising drug prices and that is why I am so concerned about the 
Trump administration's recently proposed rule containing a 
provision that would slash reimbursements on Medicare Part B 
drugs to 340B hospitals under the guise that doing so would 
somehow address the rising cost of prescription drugs.
    When Health and Human Services Secretary Price announced 
the proposed rule change, he claimed that this rule will 
somehow make drugs more affordable. And I want to be clear--
this rule would have zero impact on the actual price of 
prescription drugs and would decimate the support that 340B 
hospitals rely on to serve needy patients.
    This proposal is nothing more than a deep cut to many of 
the hospitals that serve as the bedrock of our safety net, and 
committee Democrats have repeatedly asked that this committee 
begin to have a real conversation about drug prices and this is 
not it.
    And again, I urge the chairman to hold the hearing on drug 
pricing so we can hear from all the stakeholders involved and 
so we can begin to develop real solutions that will begin to 
drive down the cost of prescription drugs. Until then, I remain 
dedicated to finding ways to strengthen the 340B program and 
ensure that it continues to fulfil its essential mission. And I 
am grateful to our witnesses for being here today to talk about 
some of the challenges the program faces as well as its 
successes and the important role it continues to play.
    And I yield back. I yield the time remaining to the 
gentlewoman from Florida, Ms. Castor.
    Ms. Castor. Great. Thank you, Mr. Pallone.
    I just wanted to say that at a time when high and 
escalating drug prices are a top concern for all Americans, the 
340B drug discount program is a real winner.
    It is a very modest government initiative that has huge 
benefits and helps our disproportionate share hospitals and 
many community health centers and other clinics all across the 
country provide affordable prescriptions to folks that need it 
that may not have insurance, that are really struggling to get 
by and then that helps those hospitals and those clinics 
stretch the dollar and keep the burden off the taxpayer.
    Doesn't mean that it is immune from oversight and that is 
important for our hearing today but 340B is a real godsend for 
so many families and health providers across the country.
    Thank you, and I yield back.
    Mr. Murphy. Gentlewoman yields back.
    So now I ask unanimous that the members' written opening 
statements be introduced into the record, and without objection 
the documents will be entered into the record.
    I would now like to introduce our panel of federal 
witnesses for today's hearing.
    First, we have Captain Krista Pedley, director of the 
Office of Pharmacy Affairs at the Health Resources and Services 
Administration. I just want to say you also got your pharmacy 
degree from the University of Pittsburgh. Fine school. Fine 
school.
    Next is Ms. Erin Bliss, who serves as assistant inspector 
general in the Office of Inspector General within the 
Department of Health and Human Service. I think more of a Notre 
Dame person there, right?
    And Ms. Debra Draper, but you have a doctorate degree so I 
am going to call you doctor today. Yes, she is the director of 
health care for the Government Accountability Office.
    Thank you all for being here today and providing testimony. 
We look forward to a productive discussion of HRSA's oversight 
of 340B drug pricing program.
    You are all aware that this committee is holding an 
investigative hearing and when doing so has the practice of 
taking testimony under oath. Do any of you have any objections 
to testifying under oath?
    Seeing no objections, the chair then advises you that under 
the rules of the House and rules of the committee you are all 
entitled to be advised by counsel.
    Do any of you desire to be advised by counsel during 
testimony today?
    OK. Seeing no things on that then we will proceed with 
swearing you in. Please rise, raise your right hand. I'll swear 
you in.
    [Witnesses were sworn.]
    Seeing all answered in the affirmative, you are now under 
oath and subject to the penalties set for in Title 18 Section 
1001 United State Code.
    We ask you all to give a five-minute summary of your 
written statement. Please try and stick with the 5 minutes. I 
will tap the gavel when you are close to that.
    Captain Pedley, you are recognized first. 5 minutes.

  STATEMENTS OF CAPT. KRISTA M. PEDLEY, PHARMD, MS, DIRECTOR, 
   OFFICE OF PHARMACY AFFAIRS, HEALTH RESOURCES AND SERVICES 
 ADMINISTRATION, U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES; 
 ERIN BLISS, ASSISTANT INSPECTOR GENERAL, OFFICE OF EVALUATION 
 AND INSPECTIONS, OFFICE OF INSPECTOR GENERAL, U.S. DEPARTMENT 
 OF HEALTH AND HUMAN SERVICES; DEBRA DRAPER, DIRECTOR, HEALTH 
             CARE, GOVERNMENT ACCOUNTABILITY OFFICE

        STATEMENT OF CAPT. KRISTA M. PEDLEY, PHARMD, MS

    Ms. Pedley. Good morning, Chairman Murphy, Ranking Member 
DeGette, and members of the subcommittee.
    I appreciate the opportunity to appear before you today to 
discuss the 340B program. HRSA shares the subcommittee's 
commitment to ensuring program integrity and today I will 
discuss steps we have taken to implement key provisions and 
strengthen oversight including some of the current challenges 
in managing the program.
    The 340B program was authorized in 1992 to stretch scarce 
federal resources by reducing the cost of covered outpatient 
drugs to 340B-eligible entities. Approximately 12,300 entities 
and 26,000 associated sites participate in addition to over 600 
manufacturers. We appreciate the work of the Office of 
Inspector General and the Government Accountability Office to 
provide recommendations on strengthening safeguards which 
inform our activities across all HRSA programs. Within our 
statutory authority HRSA has worked to address the majority of 
GAO and OIG recommendations through systematic efforts to 
improve the program.
    Two recommendations remain open from GAO's 2011 study which 
direct HRSA to clarify hospital eligibility requirements and 
the definition of a 340B patient. The OIG's 2005 and 2006 
reports include open recommendations that HRSA develop a 
pricing system to improve oversight and allow entities to 
secure pricing data. Since 1992, HRSA has administratively 
established many requirements of the program for a series of 
guidance documents published in the Federal Register, typically 
after public comment.
    In 2014, HRSA planned to issue a proposed omnibus 
regulation. However, that same year the U.S. District Court for 
the District of Columbia invalidated a 2013 final rule on a 
provision related to orphan drugs. HRSA then withdrew the 
proposed omnibus regulation from the Office of Management and 
Budget review. HRSA has prioritized rulemaking in areas in 
which the D.C. circuit has clearly recognized our regulatory 
authority.
    The agency finalized a rule in January 2017 on a 
calculation of ceiling prices and the imposition of civil 
monetary penalties for manufacturers which will become 
effective October 1, 2017. HRSA also proposed a rule in August 
2016 on the dispute resolution process. All other program 
policy areas were addressed in an August 2015 proposed omnibus 
guidance and we are working on next steps to address these 
policy issues.
    The president's fiscal year '18 proposed budget commits to 
developing a legislative proposal to improve 340B program 
integrity and ensure that the benefits derived from 
participation are used to benefit patients, especially the low-
income and uninsured. Specific legislative authority to conduct 
rulemaking for all provisions in the 340B statute would be more 
effective for facilitating HRSA's oversight and management of 
the program. Specifically, regulatory authority would also 
allow HRSA to provide greater clarity and specificity of 
program requirements.
    HRSA works to verify that both 340B entities and 
manufacturers are in compliance. Regarding covered entity 
program efforts, we conduct initial certification, annual 
recertification and program audits. We have completed over 800 
covered entity audits since 2012, which encompass nearly 11,000 
offsite facilities and 18,000 contract pharmacy locations. HRSA 
also reaudits a select number of entities with findings that 
resulted in repayment to manufacturers. HRSA posts on our 
website a summary of audit findings. The findings have varied 
from minor database corrections to findings of diversion.
    Through findings and audits, HRSA develops educational 
tools and resources for all 340B stakeholders in order to 
improve program integrity. The statute specifies the types of 
entities eligible to participate but does not specify how a 
covered entity may provide or dispense such drugs to its 
patients.
    HHS has issued guidance recognizing entity use of contract 
pharmacies to dispense 340B drugs. The majority, or 73 percent, 
of entities do not contract with pharmacies. HRSA guidance 
outlines compliance requirements for entities that utilize 
these contract pharmacies, which HRSA reviews as part of our 
audits. If a covered entity is not providing oversight of its 
contract pharmacy, the pharmacy arrangement is terminated from 
the program.
    HRSA is also actively engaged in manufacture oversight and 
has the authority to conduct audits of manufacturers. HRSA has 
conducted seven audits of manufacturers in addition to 
developing regulations and guidance specific to manufacturer 
compliance. In accordance with the statute, HRSA is required to 
collect information from manufacturers to verify the accuracy 
of 340B ceiling prices and then make those ceiling prices 
available to the covered entities.
    HRSA appreciates the work of the OIG and GAO to help 
strengthen the program. We look forward to continuing our 
partnership with them as well as with Congress to strengthen 
program integrity and enforce program requirements as well as 
increase transparency on how entities use the program to 
benefit low-income and uninsured patients.
    I appreciate the opportunity to testify today and look 
forward to your questions.
    [The prepared statement of Capt. Krista M. Pedley follows:]
    
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    Mr. Murphy. Thank you.
    Ms. Bliss, you are recognized for 5 minutes.

                    STATEMENT OF ERIN BLISS

    Ms. Bliss. Good morning, Chairman Murphy, Ranking Member 
DeGette, and other distinguished members of the subcommittee. I 
am pleased to join you today to discuss ways to protect the 
integrity of the 340B drug discount program.
    OIG has found that HRSA has strengthened its oversight of 
the 340B program over the years. However, more needs to be 
done. Some longstanding and fundamental challenges persist and 
they impede effective program oversight and operations. OIG 
recommends two key improvements to 340B program integrity and 
oversight: One, increase transparency to allow for payment 
accuracy; and two, clarify rules to ensure that the program 
operates as intended. I will explain both of these.
    With respect to transparency, OIG recommends that HRSA 
shares ceiling prices with 340B providers and states. For 
providers, this will allow them to ensure that they are not 
overcharged by drug manufacturers. Currently, 340B providers 
cannot verify that they actually receive the required discount. 
Congress has given HRSA authority to do so and HRSA is working 
on it. Sharing ceiling prices with states will allow them to 
ensure that Medicaid is not overpaying for 340B drugs. Making 
this happen may require new authority from Congress. States 
also need transparency as to which Medicaid claims represent 
340B drugs. Even when states can determine how much they should 
be paying for these drugs, they still may not know which claims 
to reimburse at that price. This transparency is also essential 
for states to correctly claim Medicaid rebates from drug 
manufacturers. Without it, states put manufacturers at risk for 
paying more rebates than they should by inappropriately 
including 340B drugs. At the same time, states risk forgoing 
rebates to which they are entitled by inappropriately excluding 
non-340B drugs. OIG recommends that HRSA work with the Centers 
for Medicare and Medicaid Services to help states accurately 
identify 340B claims.
    The second key improvement is to clarify 340B program 
rules. For one, HRSA's guidance addresses patient eligibility 
but leaves room for interpretation as to which of a patient's 
prescription might be eligible in a retail pharmacy setting. In 
these retail settings we found that providers in fact are 
making different determinations about which prescriptions are 
eligible for the 340B price.
    Let me illustrate with an example. Let us imagine a doctor 
sees a patient at a 340B community health center. Later, that 
same doctor sees the same patient at her private practice. If 
the doctor prescribes a drug to that patient at the private 
practice, is that prescription eligible for the 340B price? One 
provider in our study said yes and another said no, and another 
said it depends. So who is right? We couldn't tell, based on 
the current guidance, and so we recommend that HRSA more 
clearly define this.
    Furthermore, guidance does not address how to handle 
uninsured patients. In our review of retail pharmacies, we 
found that uninsured 340B patients sometimes received 
discounted prices but sometimes they paid full price for 340B 
drugs. In other words, uninsured patients are not always 
receiving the benefit of the 340B discount on their 
prescriptions. We recommend that HRSA address whether providers 
must offer discounted prices to uninsured patients.
    In closing, lack of transparency and clarity make it harder 
to ensure integrity and harder to determine how well the 
program is working. If HRSA needs new authorities to make these 
key improvements, we encourage Congress to consider statutory 
changes as appropriate to support increased transparency and 
better clarity.
    OIG appreciates and shares your interest in improving 
program integrity and effectiveness for the 340B program. I 
will look forward to answering your questions. Thank you.
    [The prepared statement of Erin Bliss follows:]
    
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    Mr. Murphy. Thank you, Ms. Bliss.
    Dr. Draper, you are recognized for 5 minutes.

                  STATEMENT OF DEBRA A. DRAPER

    Ms. Draper. Chairman Murphy, Ranking Member DeGette, and 
members of the subcommittee, thank you for the opportunity to 
be here today to discuss the 340B program including issues 
concerning its oversight.
    The 340B program was created by statute in 1992 and is 
administered by HRSA. According to HRSA, the intent of the 
program is to enable participating entities, also known as 
covered entities, to stretch scarce federal resources to reach 
more eligible patients and provide more comprehensive services. 
Participation is voluntary but there are strong incentives to 
do so. For covered entities such as certain hospitals and 
federally-qualified health centers, substantial cost savings or 
revenue on outpatient drugs can be obtained through 
participation in the program.
    For drug manufacturers, participation is required to 
receive Medicaid reimbursement. Since the 340B program first 
became operational in 1993, it has experienced exponential 
growth in the number of covered entities. In 1993, the program 
had approximately 400 covered entities and by 2017 there were 
more than 12,000 representing approximately 38,000 covered 
sites.
    The 340B program has also seen exponential growth in the 
number of contract pharmacies particularly since 2010. 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 1,300 in 2010 to nearly 19,000 
in 2017, encompassing more than 46,000 arrangements.
    In 2011, we reported that HRSA's oversight of the 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 recommendation was for HRSA to conduct 
audits of covered entities to ensure compliance with program 
requirements. This recommendation was a result of our findings 
that HRSA primarily relied on participants to self-police and 
ensure their own compliance.
    In fiscal year 2012, HRSA initiated audits of covered 
entities and now conducts 200 audits per year. While we are 
pleased that HRSA is conducting these audits, 200 per year may 
be insufficient, given the continued escalation and the number 
of covered entities. A second recommendation was for HRSA to 
clarify the guidance for cases in which the distribution of 
drugs is restricted including required reviews of manufacture 
plans to ensure that drugs are equitably distributed to all 
entities regardless of 340B, program participation. This 
recommendation was the result of our finding that in cases such 
as when the 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 fiscal year 2012, which 
addressed their recommendation. The remaining two 
recommendations were for HRSA to issue more specific program 
guidance on the definition of a patient eligible to receive 
discounted drugs through the program and the criteria that 
hospitals must meet to be eligible to participate. These 
recommendations were the result of our findings that the lack 
of specificity in the guidance could be interpreted in ways 
that were inconsistent with the programs intent. This was 
particularly troubling given that the 340B program has been 
increasingly used in settings such as hospitals where the risk 
of diverting 340B drugs to ineligible patients is greater 
because these settings are more likely to serve such patients.
    HRSA has attempted but not succeeded in addressing these 
two open recommendations. In 2014, it developed a comprehensive 
340B program regulation but a court ruling found that HRSA's 
rulemaking authority for the program was limited to specified 
areas. In 2015, it issued proposed guidance but withdrew plans 
to finalize it earlier this year following the administration's 
directive for agencies to withdraw pending regulations and 
guidance.
    In summary, HRSA has undertaken efforts to improve 
oversight of the 340B program. However, there are a number of 
critical issues that remain unresolved including whether the 
intent of the program, which was established nearly 25 years 
ago, is still relevant today, given the vastly changed 
healthcare landscape and 340B program environment. Continued 
lack of specificity and program guidance, most notably the 
definition of a patient and hospital eligibility criteria.
    Until these issues are resolved there will continue to be 
concerns about the integrity of the 340B program and HRSA's 
ability to provide effective oversight.
    Mr. Chairman, this concludes my opening remarks. I am happy 
to answer any questions.
    [The prepared statement of Debra A. Draper follows:]
    
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    Mr. Murphy. Thank you, Doctor.
    I now recognize myself for 5 minutes for questions.
    Captain Pedley, let me just start off with this. There is a 
lack of clarity in how the intent of the program is, which you 
outlined in your testimony in your documents there.
    The absence of reporting requirements and specific mandates 
on how savings must be spent--can you elaborate a little bit 
more on what that impact is?
    Ms. Pedley. So the statute is silent regarding how covered 
entities have to use their savings. Therefore, HRSA doesn't 
have authority to require what these entities are doing with 
their savings.
    Mr. Murphy. So is that savings--does it go into the general 
fund or the hospital or clinic or a separate account so even if 
you were to audit that separate account you could see where 
that money goes? Or is there no way to do that?
    Ms. Pedley. I don't have insight into how a hospital may 
manage those funds.
    Mr. Murphy. OK. So you wouldn't know. But you don't audit 
that anyway. So----
    Ms. Pedley. Correct.
    Mr. Murphy. But these entities are generally supposed to 
serve specific vulnerable populations. But people who may go 
into a hospital or entity that has a 340B program there is not 
a means test by which says you can't go to this program based 
upon your income. They could come in regardless of income, 
correct?
    Ms. Pedley. Correct. The statute is silent as well as to 
whether a patient is insured or uninsured. They just have to 
meet our patient eligibility guidance.
    Mr. Murphy. And the patient eligibility guidance, I 
understand, is that records have to be kept there and the 
doctor treating them has to work there?
    Ms. Pedley. Yes. There have to be records and HRSA audits 
those records.
    Mr. Murphy. OK. So do community health centers use a 
sliding scale to discount policy to determine a patient's 
ability to pay?
    Ms. Pedley. I know under their separate grant requirements 
they do have different things in place. I am not familiar with 
those.
    Mr. Murphy. OK.
    Ms. Pedley. But that is under their grant requirements, not 
under the 340B statute.
    Mr. Murphy. My assumption is they would and that would be 
one way of passing on savings. Do hospitals use a sliding scale 
to discount policy to determine a patient's ability to pay?
    Ms. Pedley. I don't have insight into that either as they 
are not required under the 340B statute to pass on the savings.
    Mr. Murphy. But hospitals and other covered entities can 
acquire the drugs at a 25 to 50 percent discount, right?
    Ms. Pedley. Correct.
    Mr. Murphy. And then charge the patients full price for the 
same drug?
    Ms. Pedley. So the amount that they charge the patient 
after they receive that discount, again, is a decision made at 
the hospital. The price that they charge is outside of the 340B 
statute.
    Mr. Murphy. So if someone who is very, very low income, 
struggling, could come in and purchase it under the intent of 
the program.
    But at that same clinic or hospital that was brought up 
before about oncology, someone could be in there--for all we 
know could be a multi-billionaire and also they would be 
eligible to--the drug would be eligible.
    The hospital could buy at a discount and sell it to the 
person at the full price?
    Ms. Pedley. So the statute is silent again on how the 
savings are used and whether the patient is insured or 
uninsured. If the patient is insured, then the entity would 
bill the insurer at the higher rate and then obtain that 
revenue to stretch their scarce federal resources.
    Mr. Murphy. And so what happens, however, is that because 
they are not required to collect this data, you don't know 
what's really happening. If you audit, you don't know, for 
example, how many people may come in there, what their income 
level is because that is not a required thing for the eligible 
patient, correct?
    Ms. Pedley. That's correct. HRSA does not audit that 
information as it is outside of our authority.
    Mr. Murphy. And the money that comes through these savings, 
you have no idea where that money goes because that information 
is not collected and it is--correct?
    Ms. Pedley. There are no requirements in the statute so we 
do not----
    Mr. Murphy. Do they voluntarily say, here's how we spent 
the money? Does anybody do that?
    Ms. Pedley. They do not voluntarily submit that information 
to HRSA.
    Mr. Murphy. And since the accounts may not be separate as 
far as you know, even if they put the money in the general fund 
that--we couldn't even trace that, how that is done?
    Ms. Pedley. HRSA would not have access to that information. 
Again, I reiterate for the grantees, however, they are required 
under their grant requirements to report 340B program savings 
as income and put that back into their grant.
    Mr. Murphy. OK. But is there any data which would show the 
level of charity care they are providing? Anything that they 
are required to show you?
    Ms. Pedley. They do not share anything with HRSA. They may 
report charity care information on their cost reports that is 
submitted to CMS.
    Mr. Murphy. And we don't know if that charity care money 
came from the 340B or came from something else?
    Ms. Pedley. Yes, HRSA would not know that.
    Mr. Murphy. So as I understand it so far with the vague 
guidelines of eligibility for patients, the intent of the 
program, of course, to help the indigent population--good.
    The idea that other people who may not fit that definition 
may still have the hospital or clinic purchasing at a discount 
and can use that money in any way, shape, or form and you have 
no way of finding out and they are not required to keep data 
and the books aren't kept in such a way that anybody could 
trace it if they wanted to?
    Ms. Pedley. Yes. The statute, again, does not in any way 
mention what covered entities----
    Mr. Murphy. OK.
    Ms. Pedley [continuing]. Do with that savings or that they 
have to report it to HRSA.
    Mr. Murphy. And operate under the assumption they are all 
doing good works but we don't know, and since 60 to 80 percent 
have some problems, we will see.
    Ms. DeGette, 5 minutes.
    Ms. DeGette. Thank you, Mr. Chairman.
    I thought your line of questioning was quite interesting 
and I would like to follow up on it a little bit.
    The chairman was asking appropriately, I think, what do 
hospitals do with the money. I don't think we have anybody here 
who would be able to answer that question, right?
    OK. So none of the three of you can answer that question. I 
would assume there is probably somebody who can answer that 
question and maybe we should have a follow-up hearing and have 
some people from the hospitals come and talk about what they do 
with that money.
    Dr. Draper, I do know that one of the GAO findings was 
that--well, first of all, is the GAO aware of a practice with 
hospitals where they get the discounts under 340B and then they 
pass those discounts along to billionaires and things like 
that? Have you found any evidence of that?
    Ms. Draper. We have not looked at that specifically.
    And getting back to your earlier question----
    Ms. DeGette. Yes.
    Ms. Draper. In our 2011 work we did interview a small 
number of covered entities to ask them what they did with the 
revenues and most said they are not required to report that.
    Ms. DeGette. Right.
    Ms. Draper. So what they told us was that they use the 
moneys to expand services to patients and to provide more 
comprehensive services.
    Ms. DeGette. So the limited evidence you got seemed to 
indicate they were using that for the original intended 
purpose?
    Ms. Draper. Yes. It was very limited information and----
    Ms. DeGette. Number one, Mr. Chairman, I think we should 
try to get some hospitals in here to talk to us, but number 
two, I think your inference is correct.
    We probably do need to get more controls and that is why I 
said in my opening statement that we may need to have more 
legislative reporting and more transparency because you can't 
have a program where nobody knows what's going on.
    But let us get back for a minute to the original purpose of 
the 340B program. Captain Pedley, what the 340B program was 
intended to do was to help providers stretch scarce resources 
and give services to people who are uninsured or lack insurance 
altogether. Is that right?
    Ms. Pedley. Yes. From report language, the intent of the 
program was for these covered entities to be able to purchase 
the drugs at a discount in order to stretch their resources and 
provide more care to patients.
    Ms. DeGette. Right. So if people didn't have this source of 
revenue, hospitals, assuming they are using the revenue for the 
originally intended purpose, they might have to cut back on 
services that they would provide to these underserved 
populations. Is that correct?
    Ms. Pedley. So if the program were not----
    Ms. DeGette. A yes or no will work.
    Ms. Pedley. Yes.
    Ms. DeGette. Thanks.
    Now, so, Dr. Draper, I understand that in the GAO audits 
you found some weaknesses in HRSA's ability to oversee the 
program and also you found that the agency needs to issue 
guidance that defines a 340B patient and clarify the standard 
for hospital eligibility. Are those in general your concerns?
    Ms. Draper. Well, to give you an example, the definition of 
a patient is very ambiguous. It is that the patient has an 
established relationship with the entity and the entity 
maintains the medical records and that the provider of services 
for that entity is either employed or under contract 
arrangement or some other type of arrangement.
    So we had concerns about the language about like some other 
type of arrangement----
    Ms. DeGette. Right.
    Ms. Draper [continuing]. What specifically does that mean, 
and I think it has been interpreted very broadly.
    Ms. DeGette. So let me ask you, do you think the agency has 
authority under the current statutory language to tighten those 
definitions up or do you think that we need to do something 
with the statute?
    Ms. Draper. Well, since 1992 the agency has issued program 
guidance to try to clarify the rules of the program. So we are 
a little confused about why. I think there is some concern that 
they need some regulatory authority versus having guidance 
and----
    Ms. DeGette. OK. So we might have to go and look at the 
statute.
    Ms. Draper. Perhaps.
    Ms. DeGette. Yes. OK.
    And Ms. Bliss, I just wanted to ask you quickly what tools 
or authorities do you believe HRSA needs in order to 
efficiently administer the 340B program?
    Ms. Bliss. Thank you.
    We believe that increasing transparency and clarity around 
the program rules is very important, and while I can't offer a 
legal opinion on HRSA's authority, our understanding is they 
may need additional authority from Congress to do this.
    Ms. DeGette. Great. Thank you.
    Thanks, Mr. Chairman. I yield back.
    Mr. Murphy. Thanks. Can I follow up on that quickly?
    With regard to those definitions of entities, are any of 
you receiving letters, pressures from other organizations, 
hospital associations, pharma, et cetera, on recommendations 
for these changes?
    Ms. Draper. We have not.
    Mr. Murphy. You have not? Ms. Bliss.
    Ms. Bliss. No, not at all.
    Mr. Murphy. Captain Pedley.
    Ms. Pedley. So when we proposed in August 2015 our omnibus 
guidance, patient definition was a part of that and we did 
receive over 1,200 comments related to the entire guidance but 
within those specifically to the patient definition.
    Mr. Murphy. OK. Just with regard to there might be some on 
this committee who would like to see some of those.
    Ms. Pedley. Yes. I agree.
    Mr. Murphy. We will sharpen our question to you. Thank you 
very much.
    Chairman Walden.
    Mr. Walden. Thank you, Mr. Chairman. Thanks for having this 
oversight hearing.
    And I just want to follow up on a couple of things. Do we 
or do we not know or audit how the savings are spent? That 
seems to be one of the issues.
    We all believe that everybody is a good actor and the money 
is going to the people most in need, as well as savings.
    But I also am not clear that HRSA actually--that there is a 
clear definition of how the money should be spent or that we 
track the money.
    Is that correct?
    Ms. Pedley. So the statute is silent as to how savings are 
used. Therefore, HRSA does not audit or have access to that 
information.
    Mr. Walden. So we really don't have a trail of bread crumbs 
as to--you know how much it saved, right? Or do you?
    Ms. Pedley. The discount on the drug?
    Mr. Walden. Right.
    Ms. Pedley. So it is on average between 25 to 50 percent 
but it depends on the specific drug.
    Mr. Walden. Do we know if those savings get passed 
specifically back to people who need reduction in prices on the 
drugs?
    Ms. Pedley. The statute is silent in that area. So HRSA 
does not have that information.
    Mr. Walden. OK. So we don't know that.
    And of those savings, could the 340B hospitals take that 
money and use it for good things but not necessarily back to 
the same person that is buying the drugs?
    Ms. Pedley. Because the statute is silent----
    Mr. Walden. Silent.
    Ms. Pedley [continuing]. We don't have access to that.
    Mr. Walden. OK. All right.
    And these are issues I think both of you have raised, 
right, from GAO and from OIG that there is just lack of clarity 
here?
    Ms. Draper. Yes. We don't know how the savings are used. 
The entities are not required to keep that information or to 
track it.
    We are currently doing some work on looking at contract 
pharmacies and we are going to be looking at things like 
discounts that are being provided to patients. So----
    Mr. Walden. OK.
    Ms. Draper. As far as the savings, there are really no 
requirements and most of the entities in our 2011 work that we 
talked to were not able to provide that information.
    Mr. Walden. So could a 340B get the savings from the drug 
manufacturer and not pass those on to the individual that 
actually charged the individual through their pharmacies, like, 
the retail price for that drug?
    Ms. Draper. I think that is very possible. There is just no 
way to know----
    Mr. Walden. We don't know.
    Ms. Draper [continuing]. Without the transparency around 
that.
    Mr. Walden. All right.
    Yesterday, HRSA's website listed a total of 41,132 
registered sites. That is an increase of 3,636 registered sites 
since the budget justification was released.
    So from HRSA's perspective, do you know how many of these 
3,636 sites are new unique covered entities and how many are 
these so-called child sites?
    Ms. Pedley. I would have to go back and look at the 
specifics of the data as to how many are new--the main facility 
or a child site, as you mentioned.
    Mr. Walden. Yes. Well, you just don't know off the top of 
your head?
    Ms. Pedley. Correct.
    Mr. Walden. OK. All right.
    Ms. Pedley. But we have that information.
    Mr. Walden. And overall you are seeing a faster growth rate 
for the new covered entities or new child sites? Which are you 
seeing the fastest growth rate for?
    Ms. Pedley. I would have to go back again and compare the 
growth rate of the new entities versus child sites.
    Mr. Walden. OK.
    Ms. Pedley. We do have that.
    Mr. Walden. And how many manufacturers are participating in 
the 340B program?
    Ms. Pedley. Over 600.
    Mr. Walden. OK. And how has that number changed in the last 
few years?
    Ms. Pedley. It stays about the same. So the manufacturers 
that participate in the program are based on the manufacturers 
that participate in the Medicaid program.
    They are required to participate in 340B if they are in 
Medicaid. Again, so we monitor when manufacturers enter into 
the Medicaid program to ensure that they also sign an agreement 
with HRSA to participate in the 340B program.
    Mr. Walden. And I don't know if this is a fair question to 
ask you, Captain, but it is my understanding that HRSA was 
given an additional $6 million in funding beginning in FY 2014 
and I guess the question is how much does HRSA now receive in 
funding to oversee the program and is that enough?
    Ms. Pedley. So we did receive an additional $6 million in 
fiscal year '15 for program integrity efforts and information 
technology as well.
    We continue to remain at the $10.2 million in total and 
that is in our proposed budget as well for fiscal year '18 in 
order to maintain our level of oversight in the program.
    Mr. Walden. And you have got how many staff involved?
    Ms. Pedley. We currently have 16 FTEs.
    Mr. Walden. Do they have other responsibilities other than 
just overseeing 340B?
    Ms. Pedley. So they specifically work on the 340B program 
anywhere from our information technology systems to registering 
entities in the program to specifically the audit function.
    Mr. Walden. So they are focused on 340B exclusively?
    Ms. Pedley. Yes.
    Mr. Walden. OK. All right.
    This has been most helpful. Obviously, there are some 
statutory issues here and some clarity issues on who is a 
patient and transparency and who gets the benefit from the 
program designed to help patients in one way or another.
    So, Mr. Chairman, thank you for holding this hearing. I 
appreciate the input of our talented witnesses.
    Mr. Murphy. Thank you.
    I now recognize the gentleman from New Jersey, Mr. Pallone, 
for 5 minutes.
    Mr. Pallone. Thank you, Mr. Chairman.
    The 340B program is a critical component of the safety net 
that serves the most vulnerable among us and 340B drug 
discounts help safety net providers make the most of the 
limited resources they receive.
    As a result, they are able to reach more eligible patients 
and provide those patients with more comprehensive health 
services, and I believe in both protecting 340B and improving 
the integrity of the program to ensure it remains strong for 
the future.
    My questions are, Captain Pedley, could you describe how 
this program helps safety net hospitals and other covered 
providers give care to needy populations? In other words, the 
340B, if you could answer that question.
    Ms. Pedley. So the intent of the program was for these 
entities defined in statute to be able to purchase the drugs at 
a discount so they can stretch those scarce federal resources.
    Once they are eligible for the program and listed on our 
database and we validate to ensure they are eligible for the 
statute they are then able to purchase these drugs at a 
discount, typically 25 to 50 percent lower than what they would 
have otherwise paid.
    Mr. Pallone. And so the discounts help ensure that all 
individuals including the under insured and the uninsured have 
access to care. Is that a correct statement on my part?
    Ms. Pedley. Yes, based on the intent of the program.
    Mr. Pallone. All right.
    Now, Captain, can you please describe how the 340B drug 
discounts generate savings for providers while expanding 
services for patients?
    Ms. Pedley. So the savings in the program are generated on 
the up front discounts that they receive on the drug.
    In addition, if the patient is insured they bill the 
insurer at the higher rate in order to create revenue to 
provide then the care to those that do not have insurance there 
or the ability to pay.
    Mr. Pallone. OK, and I know some members have already 
expressed concerns that there is not sufficient transparency 
with respect to how some 340B hospitals use their money. What 
actions is HRSA taking, if any, to improve transparency in the 
program?
    Ms. Pedley. The statute is silent on the savings but in the 
fiscal year '18 president's budget we did propose to intend to 
work with Congress on a legislative proposal to ensure the 
benefit of the program does benefit the low-income uninsured 
populations.
    Mr. Pallone. OK.
    I wanted to ask Dr. Draper what are the most important 
actions out of GAO's recommendations to improve program 
integrity in 340B and how should Congress prioritize?
    Ms. Draper. Well, I think one of the key pieces is really 
clarifying the intent of the program. The intent was set up 25 
years ago and, I think there is a misperception that it does.
    It doesn't explicitly talk about uninsured or under insured 
patients--to receive benefits through the program. That is 
implied, depending on the types of covered entities. So that is 
one issue.
    The other issue is really clarifying the definition of a 
patient. That would go a long way as well as hospital 
criteria--the criteria to participate. So those are the 
weaknesses that we currently see remaining that would really 
help improve the integrity of the program.
    Mr. Pallone. OK. So from what I am hearing, the 340B 
program does play a valuable role in our efforts to provide a 
robust safety net for vulnerable patients and while more can be 
done to improve transparency those efforts should be tailored 
towards helping the program serve more needy patients.
    So I want to thank you all for being here this morning and 
the comments, I think they are very helpful.
    I yield back.
    Mr. Murphy. Gentleman yields now.
    I now recognize Mr. Barton or 5 minutes.
    Mr. Barton. Thank you, Mr. Chairman.
    This is a difficult hearing. We have got a program that I 
think both political parties strongly support. I have got a 
number of federally qualified health facilities and DSH 
hospitals in my district that use 340B and it is an integral 
part of the care they provide to the low-income population.
    But it is a program that has just grown exponentially and, 
quite frankly, I think HRSA has done a pretty amazing job, 
given how many people you have--24 people at one time. That is 
about this subcommittee. You did 200 audits. That's 10 per 
month per person. I couldn't do 10 audits a month if I were a 
CPA. And yet, nobody really knows what's going on in the 
program because it is so big.
    I don't even understand what we are talking about when you 
talk about the money. So I am going to ask a very elementary 
question and see if you can explain it to me. If the regular 
price for a drug from a manufacturer is $10--I am making it as 
easy as I can--and the average discount for 340B is 50 percent, 
that means that the entity that is participating in the 340B 
program is charged $5. Is that right? The hospital pharmacy, 
their cost is $5. Now, if they prescribe that to an outpatient, 
what does Medicaid pay for that prescription? Do they pay $5? 
Do they pay $10? Do they pay $7.50? In other words, what, if 
any, is the markup? Can anybody answer that?
    Ms. Pedley. So, first, with the ceiling price, the price 
that an entity pays is actually set in statute. The calculation 
is set based on----
    Mr. Barton. I don't need to know that. I am using my 
example. Ten dollars is what the retail price would be--the 
normal price if it wasn't a 340B drug and you said the discount 
is 25 to 50 percent. So I made it 50. So the price is $5. What 
I want to know is the patient who gets that drug--whoever is 
paying for it, the patient or Medicaid--what do they pay? Do 
they pay $5? Do they pay $10? Do they pay $15? Do they pay 
something in between?
    Ms. Pedley. So if the patient has insurance they would pay 
their standard co-pay. If they are uninsured----
    Mr. Barton. If they are covered by Medicaid.
    Ms. Bliss. So CMS has a rule for state Medicaid programs 
that they would reimburse at that $5 plus a dispensing fee.
    Mr. Barton. Plus a dispensing fee. But there is no profit?
    Ms. Bliss. Not in the Medicaid context.
    Mr. Barton. OK. So, technically, whatever the discount is 
that is passed through?
    Ms. Bliss. Yes, to the Medicaid----
    Mr. Barton. But you have no way to prove that it really is 
passed through?
    Ms. Bliss. State Medicaid agencies don't currently have 
access to those ceiling prices.
    Mr. Barton. So nobody knows?
    Ms. Bliss. There is no check and balance.
    Mr. Barton. It is voluntary compliance. I guarantee you 
people are abusing that. I guarantee it. But let us forget 
that. Let us forget that. So we really have no controls on that 
end. If the dispensing pharmacy--they get the discount but let 
us say they charge Medicaid the regular rate, $10. So they have 
got a profit of $5. Is that illegal under current law? Are they 
required to pass it through or can they keep it and in the best 
case use it to defray the cost of another patient?
    Ms. Draper. If it is not required it is how they pass or 
whether they pass on discounts. Unless it is part of their 
federal grants for a federally qualified health center their 
grant may require them to pass on discounts but not for all 
facilities.
    Mr. Barton. So even though they are getting a lower rate 
they could charge the higher rate and use that within their 
facility for some other purpose?
    Ms. Draper. That is correct. It is not clear how that is 
being used.
    Mr. Barton. It is not illegal. I am just trying to educate 
the subcommittee how screwed up this program is.
    My last question--my time has expired--if we created a 
whistle blower option so that anybody in the country could turn 
somebody in if they think there is abuse and if there is abuse 
they got to keep some of the savings that was discovered would 
that help police the program?
    Ms. Draper. Well, I think you would have to make sure that 
the rules are clear as to what--it goes back to patient 
eligibility, hospital eligibility criteria.
    I think some of that ambiguity is----
    Mr. Barton. I am not even going down that trail.
    Ms. Draper. Yes, but I think this----
    Mr. Barton. I am assuming everybody in the program is 
allowed to be in the program.
    Ms. Draper. Right. But I think those rules are not clear. 
So people have interpreted it very differently. So until the 
rule is clear----
    Mr. Barton. It is a mess.
    Ms. Draper [continuing]. It is really difficult to do that, 
I think.
    Mr. Barton. This is a great opportunity for this 
subcommittee. On a bipartisan basis, we all support the 340B 
program. But it has grown topsy-turvy. We really need to put 
the best minds of this subcommittee on a bipartisan basis and 
see if we can come up with some solutions.
    With that, I yield back.
    Mr. Murphy. I will work on that. That is good.
    Ms. Castor, you are recognized for 5 minutes.
    Ms. Castor. Thank you, Mr. Chairman, and thank you to all 
of you for helping us keep the 340B program strong and true to 
its original purpose.
    The providers in my local community that are covered 
entities that participate are the ones that are providing 
inordinate amounts of charity care. Most of them never recoup 
the reimbursements that they need. For example, the St. 
Joseph's Children's Hospital Chronic Complex Clinic for 
medically fragile children--that is part of the BayCare Health 
System--behavioral health and substance abuse services at 
BayCare Behavioral Health and St. Joseph's Care Clinic that 
stretches the federal Ryan White funding to support a continuum 
of care to maintain a high retention rate of HIV patients.
    Tampa General Hospital is our safety net hospital. They 
provide multi-million dollars in charity care though that is 
never recouped. So 340B has been a godsend to their mission in 
our community. Captain Pedley, HRSA has already audited a third 
of hospitals in the 340B program but only a small fraction of 
the drug manufacturers.
    Program integrity is appropriate for all stakeholders. Can 
you please indicate your intention with regard to undertaking 
audits and ensuring compliance for the drug manufacturers?
    Ms. Pedley. So we audit manufacturers every year. We have 
conducted seven audits thus far. We plan to conduct an 
additional five this year. As with----
    Ms. Castor. What percentage is that?
    Ms. Pedley. So there are 600 manufacturers--whatever that 
comes out to be.
    Ms. Castor. What have the audits found so far?
    Ms. Pedley. Thus far, we do post the audits on our website 
and we have not had any findings whereby the manufacturers are 
not in compliance with the statute. The manufacturers have a 
more narrow focus than the 340B-covered and that is to provide 
the drug at or below the ceiling price and that is what we 
audit. But that is only one tool we use for manufacture 
compliance. We also ensure that once they are in the Medicaid 
program that they appropriately sign an agreement with HRSA to 
provide the drugs at or below the ceiling price.
    We also issue regulation and guidance in the program 
related to manufacturer compliance. We also review all 
allegations that we receive if a covered entity is not 
receiving a price at or below the ceiling price and we 
investigate each of those situations.
    Ms. Castor. And I think a lot of folks don't know that 
nearly one-third of the total of 340B discounts is due to a 
penalty that is enforced against drug manufacturers for raising 
the price of drugs higher than the rate of inflation or 
voluntarily providing a discount lower than the 340B price and 
that manufacturers could avoid the penalty by not increasing 
their drug prices at such high rates. How does that work?
    Ms. Pedley. So the 340B ceiling price, again, it is in 
statute and it is informed by components reported under the 
Medicaid drug rebate program and that is the average 
manufacturer price and the unit rebate amount and we receive 
those components from CMS to calculate the price.
    However, if the drug company does raise the price of their 
drugs higher than the rate of inflation there is a penalty that 
kicks in and that causes the 340B ceiling price to equal a 
zero. HRSA has policy in place and a final regulation that is 
effective October 1 that when that ceiling price equals a zero 
that the manufacturer charge a penny.
    Ms. Castor. So that is a very important incentive and, 
again, helps keep the burden off the taxpayers that I think 
needs to be maintained as we move forward.
    Captain Pedley, all the witnesses here--and you can hear 
the comments from the committee--said HRSA needs regulatory 
authority to properly administer 340B and I strongly favor 
appropriate HRSA oversight to ensure the highest level of 
program integrity. But HRSA's proposed Mega-Guidance last year 
would have dramatically limited the use of 340B well beyond 
congressional intent and harm many hospitals and their ability 
to provide charity care and the whole continuum of care. For 
example, it would have prohibited discharge prescriptions 
needed to prevent unnecessary readmissions, eliminated 340B in 
infusion centers for patients with no other options for cancer 
care, and created a complex and unworkable definition of who is 
a patient.
    If the Congress provides HRSA with such regulatory 
authority, how can we be assured that harmful proposals such as 
these wouldn't go beyond the congressional intent?
    Ms. Pedley. So HRSA's proposal in 2015 and the omnibus 
guidance we did address patient definition, and based on some 
of the things that we were seeing in our program integrity 
efforts such as audits informed our decisions around how to 
define certain elements in that guidance.
    We did receive over 1,200 comments that we took into 
consideration very seriously in drafting a final guidance that 
was sent to OMB in the fall but was then withdrawn. So we do 
take the stakeholders' comments very seriously.
    Ms. Castor. To be continued. Thank you very much.
    Mr. Murphy. Dr. Burgess is not here so it will be Mrs. 
Brooks.
    Mrs. Brooks, you are recognized for 5 minutes.
    Mrs. Brooks. Thank you, Mr. Chairman.
    Captain Pedley, I would like to talk a bit about what it 
means for diversion to occur in the 340B program and how common 
is it for you to find evidence of diversion in your audits.
    Ms. Pedley. So the statute states that 340B drugs can only 
go to an eligible patient but the statute does not further 
define what a patient is in the program.
    So we have historically defined in guidance what it means 
to be a patient. We have guidance currently in place from 1996. 
We did attempt in 2015 in the proposed guidance to further 
clarify the definition of a patient and we do audit that 
information when we audit.
    I don't have the specific numbers on findings for diversion 
and we can make sure to get those to you. But that is one of 
the areas that we specifically look at when we audit covered 
entities.
    Mrs. Brooks. Could you provide, though, some examples of 
diversion that you have found in audits?
    Ms. Pedley. So an example may be that a covered entity sees 
a patient. That patient is also seen at an outside provider at 
their private practice, and if that patient comes back to the 
hospital, for example, to see that patient.
    There may not have been sensitive enough systems in place 
to know where the drug was prescribed from because the private 
practice doctor, unless it was a referral arrangement, would 
not have been eligible for the program. So that is an example 
of an ineligible patient.
    Mrs. Brooks. And so that would be a finding against that 
hospital or provider?
    Ms. Pedley. Correct.
    Mrs. Brooks. And then what happens? What happens next when 
you do have a finding like that?
    Ms. Pedley. So when there is a finding of diversion, the 
statute does require that the covered entity offer repayment to 
the manufacturer. They are also required to submit a corrective 
action plan to HRSA which we review and approve and then 
monitor the covered entity to ensure that that corrective 
action plan is appropriately implemented. They do, again, have 
to offer the manufacturer repayment for any drugs that were 
diverted.
    Mrs. Brooks. And how long is the duration of a corrective 
action plan, typically?
    Ms. Pedley. It varies on the covered entity type and how 
severe the issue was, for example, whether it was one issue of 
diversion or many issues of diversion. So it does depend on 
that.
    But we do follow follow up with the entity and monitor them 
throughout the process.
    Mrs. Brooks. Do you have any recollection of what is 
probably one of the more egregious issues involving a 
corrective action findings in audits?
    Ms. Pedley. So in terms of corrective action plans, we do 
assess. Many times it may be that they have to make corrections 
to their software systems that track eligible patients and they 
will have to adjust those accordingly. That is a common error 
that we will see.
    Mrs. Brooks. And so what steps would you say that HRSA 
takes to minimize the amount of diversion that occurs in a 340B 
drug pricing program?
    Ms. Pedley. So I would say first and foremost we provide 
education to the covered entities regarding the definition of a 
patient, best practices in this space, and how to ensure 
against diversion. The covered entities have to annually 
recertify and attest to compliance with program requirements 
and then again through our audits we do ensure that there is no 
diversion. If there is diversion or any audit whereby there is 
repayment, we do consider those entities for reaudit so that we 
can go back and check to make sure the corrective action plan 
has been appropriately implemented and that not continuing.
    Mrs. Brooks. Have you ever terminated an entity?
    Ms. Pedley. We have terminated one covered entity for not 
submitting a corrective action plan. We were able to terminate 
them through that mechanism. We have terminated contract 
pharmacies through the program where a covered entity was not 
providing oversight and there were a few cases where we 
terminated a child or offsite clinic of a hospital because they 
were not eligible for the program. But that is just through the 
audit process. We also terminate through our recertification 
process and some other quarterly integrity checks that we do to 
ensure compliance.
    Mrs. Brooks. And Ms. Bliss, can you please let us know what 
recommendations does OIG have to help reduce diversion? What 
recommendations have you made?
    Ms. Bliss. We have recommended that the patient definition 
be clarified so that it is more clear which patients and which 
prescriptions in particular are eligible for the 340B 
discounted price.
    We have also examined how covered entities work with their 
contract pharmacies and raise concerns that the covered 
entities themselves need to conduct additional oversight and 
independent audits of their contracted pharmacies to help 
ensure there is not diversion.
    Mrs. Brooks. Thank you. My time is up. I yield back.
    Mr. Murphy. OK. Mr. Tonko, you are recognized for 5 
minutes.
    Mr. Tonko. Thank you, Mr. Chair.
    As we have heard today, the 340B program is a critical 
component of the safety net that serves our nation's most 
vulnerable patients. Congress created 340B drug discounts to 
enable these safety net providers to stretch scarce resources 
and provide comprehensive services to vulnerable patients. 
However, HHS's recent proposed rule calls for drastic cuts in 
Medicare payments to 340B hospitals. I am deeply concerned that 
these proposed cuts would greatly limit 340B hospitals' ability 
to provide vital services.
    So Captain Pedley, can you elaborate on the types of 
services that 340B hospitals provide to vulnerable patients?
    Ms. Pedley. So under the 340B program, they are able to 
purchase the drugs at a discount and, again, provide those 
drugs to their patients. But beyond that, that would be outside 
of HRSA's authority regarding the other types of services that 
they provide.
    Mr. Tonko. Yes. If the CMS rule is successful and results 
in certain safety net hospitals having less revenue, what 
impact might that have on their ability to provide services for 
low-income populations?
    Ms. Pedley. It is a CMS rule and because it is going 
through the rulemaking process I am unable to comment because 
it is out for public comment.
    Mr. Tonko. Anyone on the panel able to suggest what that 
impact would be?
    Ms. Draper. No.
    Ms. Bliss. Not in a measured way. The CMS rule is proposing 
to reduce Medicare Part B reimbursement for separately payable 
340B drugs in the hospital outpatient setting. So it would 
potentially reduce the savings generated by the 340B discount. 
There are other proposed changes to payments through the 
outpatient prospective payment system included in that rule. So 
I don't have a way to say how that would net out.
    Mr. Tonko. Yes.
    Ms. Draper. We did conduct work in 2015, looking at the 
intersection of 340B and the Medicare Part B program and we did 
find that for DSH hospitals that their Part B spending on drugs 
was substantially higher than non-DSH hospitals--almost twice 
as much--and we found that it suggested prescribing patterns of 
providers perhaps prescribing more and more expensive drugs 
than 340B hospitals.
    Mr. Tonko. Yes. The 340B discounts are also critical for 
disproportionate share hospitals which provide care to 
uninsured and under insured populations. A recent study found 
that 340B disproportionate share hospitals provided some $23.7 
billion of uncompensated care in 2014 alone.
    So, Captain Pedley, the discounts provided through the 340B 
program are one reason why 340B hospitals are able to provide 
those services to patients who are under insured or uninsured. 
Is that your understanding?
    Ms. Pedley. So the intent of the program was for the 
entities to purchase the drugs at a discount in order to 
stretch their resources. The statute is silent regarding 
whether the patient is insured or uninsured.
    Mr. Tonko. But, obviously, it is going to help some in 
those categories?
    Ms. Pedley. That was the intent of the program.
    Mr. Tonko. Right. And GAO has previously found that for all 
the covered entities it reviewed, 340B savings, and I will 
quote, ``allowed them to support their missions by maintaining 
services and lowering medication costs for patients,'' which is 
consistent with the purpose of the program.
    So, Dr. Draper, can you elaborate on the ways entities use 
340B revenue to maintain services?
    Ms. Draper. Yes. We talked to a small number of covered 
entities when we did our 2011 work and, for example, some 
federally qualified health centers talked about perhaps 
expanding their number of sites to reach more patients and to 
expand their services. So that was one example of how they use 
the money. But, again, the money is not specifically tracked so 
we don't know how much of that was used specifically for that 
but that is what they told us.
    Mr. Tonko. Yes. Thank you.
    And, Captain Pedley, I understand the proposed rule was 
issued by CMS and not HRSA. But is it fair to say that a 
drastic reduction in payments to 340B hospitals would have a 
significant impact on covered entities in your program?
    Ms. Pedley. I am unable to comment due to the fact that it 
is in proposed format.
    Mr. Tonko. Right. Well, thank you.
    Mr. Chair, I am all for finding solutions to rising drug 
costs. But this proposed rule does nothing to address that. It 
would be a disaster for 340B hospitals and certainly for the 
critical services they provide.
    With that, I yield back.
    Mr. Griffith. I thank the gentleman.
    The gentleman from New York, Mr. Collins, is now recognized 
for 5 minutes.
    Mr. Collins. Thank you, Mr. Chairman.
    I want to thank the witnesses as well and maybe, to start 
with a summary, we all understand the importance of 340B 
including the pharmaceutical companies, what the intent was in 
1992.
    I think the reality is that the landscape of the cost of 
drugs, especially in the oncology world, especially as we have 
gotten into some of the biologics and the treatments, which are 
great for any and all of these patients. But the costs are 
astronomical. And as a result then these discounts become very 
significant and much more so than a generic drug type of thing.
    So it has been a very changing pharmaceutical world, 
certainly the last 10 or 15 years compared to '92. I think all 
of us are worried about the transparency--clearly, the lack 
thereof. The definition of a covered patient--because none of 
us want to see this program implode unto itself. And I guess 
the example I use, if you are an airline and you are flying a 
plane with 200 seats and the average price on the plane is $400 
but you do know that you have got to discount 10 seats on that 
airplane. So you have got a revenue piece that gets into your 
pricing model that you have got 190 seats at $400 and 10 seats 
at $200, you got that model.
    But what we are starting to see, especially in the oncology 
world, is private hospitals buying up oncology practices. There 
is only one reason they are buying the oncology practices. 
Those are the most expensive pharmaceutical drugs prescribed 
and a 50 percent discount on a $60,000 drug is real money, and 
we don't know where the money is going. We don't know if the 
patients are getting it properly or whether there is a 
diversion.
    But as that percentage goes up, think of the airplane 
taking off now with 200 seats and half of them are at $400 and 
the other half are at a 50 percent discount. There is only one 
thing that is going to happen. The $400 price is going to $500. 
So here we are. We always are worried about the cost of 
pharmaceutical drugs but potential abuse in the 340B program--
there is no free lunch in America. At least that is what we 
were taught growing up. The price of the drugs will go up 
because the abuse results in the most expensive drugs grabbing 
this discount.
    So the transparency is critical and I think our committee 
can work together on that. I do know factually there are 
hospitals that have a line item in their P&L and it is called 
340B discounts. 340B discounts is an actual line item on their 
profit and loss statement and they don't use it for additional 
services. It is simply a line item on the P&L and that is where 
we need to know where the money is going.
    These are not the grantees. The grantees, the Ryan White 
AIDS clinics, we know exactly what they are doing and that was 
the intent back in 1992. And some of the grantees are very 
worried--because I have met with them--that if we don't get 
this under control there could be impacts on them and nobody 
wants to impact any of the grantees.
    So I guess it comes back, Captain Pedley--as we have heard 
the others, the OIG and the GAO state, we need this clarity on 
patient definition. We need clarity on requirements for 
transparency and we need perhaps clarity out of HRSA. What do 
you need from us? Because guidance is guidance. Regulations and 
regulatory authority is that.
    But there seems to be almost a disconnect of what you are 
allowed to do, what you are not allowed to do. Do you need more 
regulatory authority for Congress or don't you? You see my 
worries and I hope--I tried to give you an example of why we 
have got to get this under control.
    Ms. Pedley. Based on the court ruling in 2014, the court 
held that the statute only provides HRSA regulatory authority 
in three specific places and that is the ceiling price and 
civil monetary penalties for manufacturers and administrative 
dispute resolution process. The first two are combined.
    All other areas of the program we do not have specific 
regulatory authority. We do propose in the fiscal year '18 
president's budget to provide that regulatory authority for 
HRSA. Regulatory authority does provide us the ability to be 
more clear and the requirements of the program, which is why we 
did include that in the president's budget.
    Mr. Collins. So are you saying right now--for instance, I 
also serve on the Health Subcommittee of Energy and Commerce--
do we on the Health Subcommittee have the language you would 
like? Because I would think fairly quickly we could move that 
language into a bill and I think, in a bipartisan way, move 
that through Congress. Have they been that specific? Has HRSA 
been that specific?
    Ms. Pedley. I would have to check with my department 
colleagues on whether there has been specific language.
    Mr. Collins. If there is, could you provide that to the 
committee and to myself? Because I think that could be a very 
quick starting point.
    Thank you, Mr. Chairman. I know my time is up. Thank you 
all for your testimony.
    Mr. Griffith. Thank you.
    The gentleman from California, Mr. Ruiz, is recognized for 
5 minutes.
    Mr. Ruiz. Thank you, Mr. Chairman. Thank you for this 
conversation. I have worked very closely with FQHCs and rural 
clinics. In fact, my medical career--I grew up in an FQHC, 
essentially, that was a block from my house, that took care of 
farm workers and I have seen patients that go in that couldn't 
afford their medications, and the 340B program is very 
essential for a clinic to be able to provide lower cost or at 
least cover the uncompensated under insured patients' costs and 
expand their services. So this is something that we definitely 
need to strengthen and to get right. But we are not talking 
about the big picture here. Why are drugs so expensive to begin 
with? That is the common sense question.
    This is another band-aid approach to figuring out how can 
we make medications more affordable. But we are really not 
addressing the elephant in the room, which is why are these 
medications so expensive and perhaps in addition to 
transparency for this program where we want information from 
FQHCs and people that are struggling to meet the needs of 
underserved communities we should also have transparency on the 
big pharmaceutical companies on their costs and their pricing 
and where are their moneys going to so that we can figure out 
how we can help protect patients and other entities who have 
the focus on providing care for our neediest patients 
throughout America and our middle class families who are under 
insured and who are still struggling to make ends meet.
    So we need to protect this crucial program which allows 
thousands of entities across the country to provide lifesaving 
prescriptions and care for the most vulnerable in our 
communities. And we know that these providers operate on very 
narrow margins and this program allows them to stretch their 
money to serve more patients. For example, the Desert AIDS 
Project in my district has a Hepatitis C program through which 
patients have access to the medication to treat their disease 
that otherwise can be cost prohibitive. And I have seen day in 
and day out how not having access to the proper medication is 
devastating to the overall health of patients.
    Ms. Bliss, you talk about transparency. If you were to have 
a wish list of what you want to know in transparency within 
these programs, what would that wish list be like and what is 
the number-one information that you would most advocate for in 
terms of transparency?
    Ms. Bliss. Thank you.
    In the current program as it stands, we are advocating for 
increased transparency in the ceiling prices and identifying 
which claims are subject to the 340B discount and that is 
because there are existing program rules around those features 
of the program. So coming from an oversight entity, our link is 
to those criteria. Where we advocate that there be new 
information, new guidance is where there are missing rules.
    So at this point, we are focused on the program as it 
stands. But we would, in an environment with additional rules, 
then we would certainly recommend transparency go hand in hand 
with new requirements so that we would be able to tell whether 
the program is working as intended.
    Mr. Ruiz. For example, what kind of transparency would you 
place on hospitals and clinics?
    Ms. Bliss. Well, at this point, there are no reporting 
requirements, as Captain Pedley has described, about how those 
savings get spent. But there are also no requirements about how 
they should be spent. So if hospitals were to start reporting 
those today, we wouldn't have a measure to judge the success or 
the outcomes or whether they would meet program intent. So 
reporting requirements tied to actual program criteria and 
goals are what would be most effective.
    Mr. Ruiz. What would be most helpful for you, Captain 
Pedley, in being able to enforce these in terms of 
transparency?
    Ms. Pedley. So the statute is silent on the savings piece. 
But we did propose in the budget to work with Congress on 
ensuring that the program does benefit patients, especially 
those that are low-income uninsured. We are also working in 
terms of transparency, as mentioned, on the 340B ceiling 
prices. We are working on a system to provide those ceiling 
prices to the covered entities so that they can see the prices 
that they are to be charged.
    Mr. Ruiz. Well, I certainly appreciate and would advocate 
fiercely in order to see those cost savings translated into 
real patient out-of-pocket savings. I do also know as well that 
some of those savings are used for other programs that are in 
dire need in those underserved communities. And so, I think 
that a combination of both are very wise for these entities who 
work under very strained under resourced conditions to provide 
an enormous amount of help for patients who actually need it.
    So thank you very much for your efforts.
    Mr. Griffith. Gentleman yields back.
    The gentleman from Michigan, Mr. Walberg, is recognized for 
5 minutes.
    Mr. Walberg. I want to start by thanking the chairman for 
holding this hearing.
    The 340B program assists some of the most needy patients in 
our communities, including those who receive their care at 
community health centers, hemophilia treatment centers, and HIV 
clinics. As the number of entities participating in the 340B 
program has quadrupled since 2011, we have learned of greater 
oversight challenges and we are hearing of those today. I am 
hopeful and expectant that this hearing will help us clearly 
identify those challenges as we seek to preserve and strengthen 
this 340B program. So it continues to truly meet needs.
    Captain Pedley, I see that HRSA first began auditing 
covered entities in 2012, as recommended by a 2011 GAO report. 
As has been noted, HRSA has fewer than 30 staff devoted to 
oversight of the 340B program. So it is understandable that 
HRSA has conducted relatively few audits over the years when 
compared with the size of the program--51 audits in fiscal year 
2012, building up to 200 audits in fiscal year 2016.
    What concerns me is the high rate of noncompliance that 
HRSA uncovered in a very small sample size of the program. 
Based on the available data, HRSA found noncompliance in 63 
percent of 2012 audits. In 2013, that number rose to 79 percent 
of audits showing noncompliance in 2014. Eighty-two percent of 
audits in 2015--that number dropped slightly to 78 percent. And 
finally, in 2016, of the audits that have been completed so 
far, 66 percent show noncompliance. Those numbers are just 
staggering.
    Can you explain to me how HRSA selects the entities it 
audits and why those numbers are so high?
    Ms. Pedley. So HRSA determines the audits on two different 
models. The first is a risk-based approach whereby we factor in 
certain risk factors and then randomly select based on those 
risk factors. We then separately specifically target audit some 
of the entities either based on specific allegations we have 
received about the entities already being in noncompliance or 
information that we have that we are unable to resolve an issue 
with an entity. Then we may go in and target audit an entity 
already known with an issue. So the entities that we choose are 
already at higher risk.
    Mr. Walberg. Am I correct that the audits only cover small 
number of the drugs that an entity might purchase through 
participation in the 340B program rather than a full audit of 
all drug purchases by that entity?
    Ms. Pedley. So we use the standard auditing process whereby 
we do sample based on a statistical methodology, a certain 
percentage of the drugs to ensure that they meet program 
requirements specific to diversion and duplicate discounts. 
However, we do review all other aspects of the program outside 
of the sample in addition to looking at their policies and 
procedures, interviewing staff, and looking at all other 
documents necessary to ensure that compliance beyond just the 
sample of drugs.
    Mr. Walberg. So even the small number of audits connected 
by HRSA only cover a fraction of that entity's participation in 
the program?
    Ms. Pedley. So the sampling is specific to the diversion 
and duplicate discounts that we sample and that is a standard 
process used in auditing. But we look at the entire program to 
ensure compliance, policies and procedures, interviews, looking 
at their software systems and how they track drugs.
    Mr. Walberg. OK. Thank you.
    Ms. Bliss, has the OIG considered whether the 340B program 
encourages the use of brand drugs and discourages the use of 
generic drugs?
    Ms. Bliss. We have not studied that particular issue.
    Mr. Walberg. Is there any incentive to study that? An 
incentive to prescribe more drugs and more expensive drugs 
because the entity has received those drugs that reduce price?
    Ms. Bliss. In theory, there is certainly financial 
incentives to maximize the spread and your payments and your 
reimbursements.
    Mr. Walberg. Ms. Bliss, has the OIG reviewed whether the 
340B program has created an incentive for hospitals to acquire 
practices?
    Ms. Bliss. We have not specifically examined hospital 
incentives. I believe my colleague from HRSA had some work 
touching upon that issue.
     Ms. Draper. Yes.
    Mr. Walberg. Ms. Draper.
    Ms. Bliss. Oh, I am sorry.
    Ms. Draper. That is OK. Actually, in 2015 we did look at 
Medicare Part B, the intersection of that with the 340B program 
and we did find the average number of oncology patients 
increased for all hospital groups but the most for the 340B DSH 
hospitals.
    And we also found that the Part B drug spending was 
substantially higher at 340B DSH hospitals which suggests that 
the financial incentives may influence prescribing patterns to 
prescribe more and more expensive drugs.
    Mr. Walberg. OK. Thank you.
    I yield back.
    Mr. Griffith. I thank the gentleman.
    The gentlewoman from Illinois, Ms. Schakowsky.
    Ms. Schakowsky. Thank you.
    Well, I am happy to see that everyone on the committee has 
expressed their support--just about everybody--for the 340B 
program because it certainly is a vital source for health care 
providers that really underpins our safety net programs. And I 
am all in favor of doing everything we can to make sure that we 
provide the proper oversight. But I wanted to make a couple of 
comments. One may seem irrelevant but I would hope that members 
of this committee would have as great enthusiasm for audits of 
the Defense Department and where big money is really spent.
    And I would also like to comment my support for and 
associate myself with the remarks of Dr. Ruiz, who was talking 
about hep C patients being able, under this program, to be able 
to afford drugs that could offer a cure, but that we also want 
to look at why the pharmaceutical companies are charging tens 
of thousands of dollars for this drug and charging so much for 
other drugs and I think that this committee needs to look at 
more than--this is really not, I don't think a discussion about 
the price of drugs as much it is a particular small program.
    I am concerned with the CMS-proposed rule and I know, 
Captain Pedley, that you said it is under advisement and so you 
can't talk about it. But can you describe it so that I 
understand it better what this proposed rule would do? Because 
what it sounds to me is at the end of the day that the entities 
like hospitals and FQHCs would receive less money. Can you 
describe it?
    Ms. Pedley. I don't know the details of that rule. That is 
under the purview of CMS and we could help connect you with 
them. But I would be unable to go into any detail.
    Ms. Schakowsky. OK. And you were also asked the question 
describe the types of comprehensive services 340B covers. You 
were just strictly talking about the discount drugs. Is there 
anything else that you can add about that?
    Ms. Pedley. HRSA does not track or have information on how 
the entities use the savings to provide or care to more 
patients.
    Ms. Schakowsky. OK. The 340B program has a demonstrable 
effect in helping disproportionate share hospitals and rural 
hospitals save their patients and that is a key part of the 
program that they are able and actually required to spend that 
money into engaging in meaningful and beneficial work to 
support the most vulnerable.
    So let me ask you then what you think are the key--Captain 
Pedley, the key areas that we ought to be looking at to support 
your work in making sure that your audits are as effective as 
they can be and that this program is as effective as it can be.
    Ms. Pedley. As proposed in the fiscal year '18 president's 
budget, HRSA only, again, has regulatory authority in the three 
specific areas and we have proposed guidance in all other 
areas. The regulatory authority across the program is critical 
for us to be able to provide clarity in our program 
requirements and assist HRSA in our oversight efforts to be 
able to then enforce those requirements. So regulatory 
authority is key.
    Ms. Schakowsky. So this program has just been described as 
a real mess by some others on the other side of the aisle. Dr. 
Draper, would you agree that that is accurate, based on what 
GAO has looked at?
    Ms. Draper. Well, we have identified weaknesses in 
oversight and we believe that the oversight needs to be 
improved and there are things that can be undertaken to make 
that happen.
    Ms. Schakowsky. What is the most important thing that we 
ought to do?
    Ms. Draper. Well, we talked a little bit about--I want to 
reemphasize about hospital eligibility. I think it is really 
important to think about HRSA's role with oversight related to 
participating hospitals. In 2011, about a third of U.S. 
hospitals were participating in the 340B program and by 2015 
they are 40 percent. HRSA may have more updated numbers.
    But I think the issue, because other grantees have specific 
requirements based on their grants that they have to follow in 
treating under insured or uninsured patients, you have a range 
of hospitals participating in this program and they operate in 
settings that provide both inpatient and outpatient services.
    So the risk for diversion is really--there is more risk. 
Because this is an outpatient program, drugs are not to be used 
for an inpatient setting. Hospitals also tend to have more 
complex contracting arrangements in organizational settings, 
which is really different than the federal grantees, and then 
they provide a larger volume of drugs in multiple settings. So 
I think the risk is probably higher for a hospital and that is 
why I think that the hospital eligibility criteria is really 
critical as well as the definition of a patient.
    Ms. Schakowsky. In my home state of Illinois there are over 
a hundred hospitals participating in the 340B program, and by 
and large, I think, and I am not disagreeing that we want to 
look at this carefully, but that helps those institutions 
better serve their patients. The 340B program helped a 9-year-
old patient with a brain tumor who receives care at the 
University of Illinois in Chicago and they were able to afford 
a drug that she needed for her chemotherapy regimen that is not 
covered by her insurance.
    So, we all have anecdotal information, I think. But I just 
worry that we don't want to throw out the baby with the bath 
water.
    Ms. Bliss, what would you say is the most important thing?
    Ms. Bliss. Clear program rules are fundamental to ensuring 
program integrity, accountability, and even assessing to what 
degree the program is working.
    Ms. Schakowsky. OK. I yield.
    Mr. Griffith. I appreciate that. Thank you very much for 
yielding back and I now recognize the gentlelady from 
California, Mrs. Walters.
    Mrs. Walters. Thank you, Mr. Chairman, and I would like to 
thank the panelists for being here today.
    Captain Pedley, I understand that the number of entity 
child sites has more than doubled in the past 6 years, rising 
from roughly 16,500 in 2011, according to GAO, to 41,132 as of 
yesterday, according to HRSA. Two weeks ago on July 5th, HRSA 
listed the number of registered child sites at 40,745. 
Yesterday, July 17th, that number had increased by almost 400 
sites. That is a drastic increase in child sites. And I would 
like to get a sense of what is driving that increase in sites 
and how that affects program integrity. How much can this rise 
in child sites be attributed to consolidation--that is, the 
trend of larger entities often DSH hospitals find smaller 
clinics and physician practices that as a result fall under 
their 340B umbrella?
    Ms. Pedley. The statute is very specific as to which 
entities are eligible for the program and HRSA's role through 
that process is to ensure that when an entity applies that they 
do meet the statutory requirements. So everyone that we do list 
in the program does meet the statutory requirements and is 
eligible.
    Mrs. Walters. OK. When a covered entity acquires another 
practice as a child site, it is my understanding that the drugs 
dispensed to that child site's patients often becomes eligible 
for 340B discounts. Does that child site take on any new 
statutory or regulatory obligations such as providing the kind 
of care that originally qualified the parent site for 340B 
status?
    Ms. Pedley. So specifically for a hospital, and it may be 
different for a grantee, but for a hospital if they do acquire 
an outpatient facility they do first have to be reimbursable on 
that hospital's Medicare cost report before they are eligible 
for the 340B program because that is our test to ensure that 
they are an integral part. Once they are in that cost report 
then they also have to enroll, be listed on our database. They 
can then purchase drugs at that clinic as well and they have to 
meet all other 340B requirements just as the main facility 
does.
    Mrs. Walters. OK. And to what extent is consolidation 
guided by perverse incentives? For example, a recent report has 
shown that there has been a 172 percent increase in the 
consolidation of community oncology practices into hospitals 
since 2008.
    Ms. Pedley. HRSA's role is to ensure that everyone that 
does register does meet statutory requirements. I am unable to 
speculate on business decisions a hospital may make to acquire 
those facilities. Our role is to ensure that they are eligible 
for the program.
    Mrs. Walters. OK. And as you know, oncology drugs can be 
quite expensive, and I know we talked a little bit about this 
before. If the covered entity is purchasing oncology drugs at 
the 340B discount but not charging the patients at a discounted 
rate for those drugs, this can be profitable for the covered 
entity.
    Does this function to serve vulnerable patient populations 
and, if not, does it run counter to the intent of the program 
and how does this consolidation affect patient care?
    Ms. Pedley. The statute is only specific around the 
different compliance elements related to the 340B program--for 
example, the patient definition and duplicate discounts. It 
does not provide HRSA the authority around how the entity uses 
those savings.
    Mrs. Walters. OK. And how does this consolidation affect 
patient care?
    Ms. Pedley. I am unable to comment on those business 
decisions made by the hospital.
    Mrs. Walters. OK. I yield back the balance of my time. 
Thank you.
    Mr. Murphy. Ms. Clarke, you are recognized for 5 minutes.
    Ms. Clarke. I thank you, Mr. Chairman, and I thank our 
panelists for enlightening us today with this discussion.
    I have been an ardent supporter of the 340B program. In 
fact, I have six nonprofit safety net 340B hospitals as well as 
multiple federally qualified community health centers and 
clinics in my district. Having the access to affordable 
medications provided through this program has saved countless 
lives in my district as well as improved the quality of life 
for many of my constituents. It is due in large part to this 
program that one of the hospital systems in my district was 
able to increase uncompensated care by 34.68 percent.
    With the current debate raging around the repeal of the ACA 
and my Republican colleagues' attempt to systemically dismantle 
the Medicaid program by their health care reform bills, the 
340B program is needed now more than ever. However, I can't 
overlook numerous government reports citing the vulnerabilities 
in this program. Drug manufacturers have also expressed their 
concerns about the reports of such vulnerabilities.
    To be clear, I support the intent of the program, but I do 
believe that more transparency and accountability is required. 
Therefore, additional oversight and reasonable checks and 
balances are needed to strengthen the program.
    So my question is to you, Captain Pedley. The first 
question is can you provide me with the dates by which some of 
the oversight tools stemming from the GAO and OIG 
recommendations will be fully implemented? Specifically, what 
is the estimated completion date for the ceiling price website 
which can help ensure that covered entities are paying the 
appropriate drug price? And can you tell me the date by which a 
centralized mechanism similar to the 340B Medicaid exclusive 
file will be up and running for Medicaid managed care 
organizations?
    Ms. Pedley. The 2011 study from GAO did recommend 
information for us but specific to the ceiling price system 
that you mentioned we received funding in fiscal year '14. We 
honored that and we had a contract put in place that September 
in order to start development of that system. It is complex. 
There are over 40,000 drugs as part of that system.
    We also have to ensure that it is developed in a way to 
ensure the confidential and proprietary nature of those prices 
and to ensure that the information in that system is not 
redisclosed. We are getting close to the release of that system 
and plan for it to be released in the coming months so the 
covered entities are able to view the ceiling prices.
    Ms. Clarke. So that would be this year?
     Ms. Pedley. In the coming months.
    Ms. Clarke. 2017. Coming months. Months are always coming.
    [Laughter.]
    Ms. Pedley. We do hope that it is soon and we have an 
education plan in place to ensure that those that are going to 
be able to use the system have adequate time to learn it so 
they can understand more about that system and the information 
it will contain.
    Ms. Clarke. The 340B Medicaid exclusive file--is that part 
of the system that you are speaking of?
    Ms. Pedley. No. That is a separate document--the Medicaid 
exclusion file. There is currently one in place for Medicaid 
fee for service and the purpose of that file is to ensure that 
states and manufacturers have the information necessary to 
prevent a duplicate discount in the program, meaning to prevent 
a 340B drug discount and a Medicaid rebate on the same drug and 
the file is used for that purpose. We are separately going 
through the process of developing policy around duplicate 
discounts and Medicaid managed care.
    Amendments were added to the statute in 2010 that did 
include now Medicaid managed care under the duplicate discount 
provision. We proposed in our 2015 omnibus guidance policy 
related to that matter and we received comments.
    We are also in discussion with CMS related to that as there 
will also have to be policy in place by CMS in the states in 
order to make that process work.
    Ms. Clarke. Well, that process is of interest to me since I 
have a significant portion of the recipients in my district are 
now in Medicaid managed care plans.
    Are there no completion dates that are up and running and 
when can those dates be really confirmed for us?
    Ms. Pedley. So we first have to address the policy matters 
as to how to handle duplicate discounts related to Medicaid 
managed care and we are working with the administration 
currently on next steps related to that policy.
    And then from there we would develop some type of file or 
information that would be used to prevent those duplicate 
discounts.
    Ms. Clarke. Well, let me close by congratulating you 
because I know that HRSA has been working on this item for a 
while and I am happy to see them finally done.
    I yield back, Mr. Chairman.
    Mr. Murphy. Thank you, Ms. Clarke.
    I recognize the gentleman from Pennsylvania, Mr. Costello, 
for 5 minutes.
    Mr. Costello. Following up on Ms. Clarke's line of inquiry, 
Captain Pedley, do you agree that given that two-thirds of the 
more than 70 million Medicaid enrollees are in managed care 
that whatever policy changes you are proposing there would 
probably go further in terms of addressing the issue of 
duplicate discounts than anything else?
    Ms. Pedley. So under Medicaid managed care we do have to 
first develop that policy for how duplicate discounts are to be 
prevented under Medicaid managed care and that involves many 
parties through the process. Our authority specifically over 
how an entity prevents those duplicate discounts. CMS would 
have to separately address this issue with the states and the 
Medicaid managed care organizations.
    Mr. Costello. Do you agree that the policy change can occur 
within the regulatory realm and that no legislative action will 
be required?
    Ms. Pedley. HRSA does not have regulatory authority related 
to duplicate discounts.
    Mr. Costello. CMS?
    Ms. Pedley. I do not know the answer.
    Mr. Costello. So at this point, you do not know, and I 
don't mean this to be an unfair question--you don't know 
whether this will require legislative action in order to 
address the policy change required in order to drill down and 
prevent duplicate discounts in the managed care realm?
    Ms. Pedley. We have the authority to present guidance as we 
have presented in our proposed guidance. In order to regulate 
on this issue, we would need a legislative change.
    Mr. Costello. OK. Do you have an opinion on what policy is 
required or legislative change is required in order to address 
that?
    Ms. Pedley. So in the fiscal year '18 proposed budget we 
did propose for broad regulatory in the program in order for 
HRSA to better clarify our policy and to ensure that those 
policies are enforceable.
    Mr. Costello. Shifting gears, this is in the testimony of 
Ms. Bliss, HRSA worked with CMS and with Congress to obtain any 
needed authority to share ceiling prices with state Medicaid 
agencies. Do you have sufficient statutory authority to carry 
out that recommendation of providing ceiling prices to state 
Medicaid agencies?
    Ms. Pedley. The statute is very specific to allow HRSA to 
provide the ceiling prices to covered entities. Therefore, we 
would need a legislative change to provide that information to 
the states.
    We are currently in discussion with CMS regarding some 
possible administrative options. But we would need up front a 
legislative----
    Mr. Costello. OK. So let us talk about that for a second. 
Let us assume that state Medicaid agencies have the ability to 
learn of the ceiling prices. Can you share for this 
subcommittee how that would positively impact the program 
integrity?
    Ms. Pedley. So in terms of providing the ceiling prices to 
states, it would not address any issues around duplicate 
discounts under the 340B statute. The ceiling prices would be 
in place to help inform the prices being paid for those drugs 
so that the states could reimburse the covered entity according 
to CMS rules.
    Mr. Costello. Can you share with me if you were to use 
claims level methods to identify claims for 340B purchased 
drugs and HRSA's guidance were updated related to same, what 
would that do in terms of program integrity? Would it improve 
it?
    Ms. Pedley. So claims level data as suggested by the OIG in 
their study would make transparent the specific 340B drugs that 
are being purchased in order to prevent duplicate discounts.
    Mr. Costello. Do you believe that there is an insufficient 
technology platform right now in order to provide the type of 
transparency and accountability in order to make sure that this 
program operates the way that it should?
    Ms. Pedley. So related to the recommendation made by the 
OIG for HRSA to provide more clarity regarding Medicaid managed 
care and how to prevent duplicate discounts we have been 
working very closely with CMS and we have convened many of the 
stakeholders in this space regarding how a solution may play 
out to prevent duplicate discounts----
    Mr. Costello. Right.
    Ms. Pedley [continuing]. And an IT solution is very 
important to that process.
    Mr. Costello. There are the clarity issues. The clarity 
issues, because there is ambiguity, people can interpret things 
differently and thus you have different results given the same 
set of facts.
    The question I have is for the enforcement side of this, 
you are doing, I think, less than 1 percent of all of these 
340B facilities get audited, right, because of a manpower 
issue.
    If you have the right IT in place, a lot of that sort of 
speaks for itself, does it not? And so the question is really 
geared more towards the IT side of this and if you have the 
right IT platforms in--well, here is a question.
    I know my time has expired. If you had the right IT 
platform, do you feel that you could perform more audits in the 
same amount of time or in the same--could you provide more 
audits in a given year if you had a better IT platform?
    Ms. Pedley. We have not explored IT related to whether we 
could conduct more audits or not. But that is something that we 
could look into.
    Mr. Costello. Well, the IT would be on the side of the 
reporting, right?
    My time is up. I yield back.
    Mr. Murphy. Mr. Carter, you are recognized for 5 minutes.
    Mr. Carter. Thank you, Mr. Chairman. I thank all of you for 
being here. This is an extremely interesting subject on a very 
important subject as well.
    I am going to start with you, Dr. Pedley, and by the way, 
Mr. Chairman, she is a doctor. She had a PharmD degree as well 
as being a captain. I know that Dr. Draper mentioned earlier 
when she was asked a question about what could we do to improve 
the program she mentioned about the hospital eligibility. But 
one thing that I am concerned about is the patient eligibility. 
If I have heard to, Dr. Pedley, say once I've heard you say it 
50 times during this hearing the statute is silent. The statute 
is silent.
    What do we need to do to clarify patient eligibility? Do we 
need to do it legislatively or can you do it?
    Ms. Pedley. So the statute is silent on what entities do 
with their savings. It is--it does, however, mention that it 
has to go to a patient and HRSA does have authority related to 
creating guidance on who is an eligible patient.
    And we have done that. We have a guidance currently on what 
defines a patient from 1996 and we proposed in 2015 additional 
guidelines related to the definition of a patient.
    However, we do not have regulatory authority to regulate on 
what----
    Mr. Carter. That comes from Congress? So we need to do 
that?
    Ms. Pedley. We would need a legislative change.
    Mr. Carter. OK. Count on it.
    I want to go to you, Dr. Draper, because something is very 
important to me and that is--and I know that Representative 
Collins mentioned this and it is just something that I want to 
get clarified here because I think that there is a lot more 
that goes on here than we recognize--a lot more ramifications, 
if you will, and that is the GAO has released a number of 
reports including the report in June of 2015 that said the 
financial incentive to maximize Medicare revenues through the 
prescribing of more or more expensive drugs at 340B hospitals 
also raises concerns. You acknowledge that. You acknowledge 
that you have seen a tendency for more 340B drugs to be used in 
those hospitals that are eligible for this.
    Not only does excess spending on Part B drugs increase the 
burden on both taxpayers and beneficiaries who finance the 
program through their premiums, it also has a direct financial 
effect on beneficiaries who are responsible for 20 percent of 
the Medicare payment for their Part B drugs. This is something 
that is very important. Throughout this hearing, I have heard, 
well, this isn't really talking about prescription drug costs. 
Well, it is really talking about prescription drug costs 
because I can assure you this is helping to increase 
prescription drug costs.
    One of the things that you were asked by Representative 
Collins is about the incentive for hospitals to buy up 
physician practices in order to gain that authority or in order 
to gain that ability to have them participate in 340B programs. 
Is that something that you see happening?
    Ms. Draper. On our 2015 work we did find that the average 
number of--I know there has been a lot of discussion about 
oncology practices in particular, but the number of oncology 
patients increased for all hospital groups but the most for 
340B hospitals.
    Mr. Carter. Absolutely, and the less competition we have 
within the healthcare system the higher the prices are. So it 
is just a merry-go-round here.
    I am not naive enough to believe that this is the worst 
administered program that we have in the federal government but 
I think it is an example of how a program that was set out with 
the best of intentions can mushroom into a program that is just 
out of control.
    Listen, it is not just the pharmaceutical manufacturers who 
aren't making as much money as they will. If I have insurance 
and I am being charged through the 340B program, the hospital 
is making money off of me. They are making money off my 
insurance. They are causing me to have higher premiums in the 
end. It has just as much an impact on me as it has on anyone. 
Even though I have insurance, it is causing insurance to go up. 
It's causing prescription drug prices to go up. Hospitals are 
right when they say, we are in compliance. They are in 
compliance because what is compliance?
    Nobody can really define what compliance is. They can point 
to just about any program that they have and many of them have 
fine programs that they are administering. But until we make 
sure that we are setting the record straight on what they are 
supposed to be doing with this, no one is going to be out of 
compliance. Not only that, but the repercussions when we do 
find someone who is out of compliance there aren't even there--
there aren't even any penalties there. You have said that over 
and over again.
    There is one word that we can sum up prescription drug 
pricing, that we can sum up this program with, and that is 
transparency. We need transparency within prescription drug 
pricing. We need it here. We need it in the individual 
markets--transparency. Whatever happened to the ability to just 
buy directly from the pharmaceutical manufacturer?
    Right now there has got to be all kind of discounts, and I 
apologize for getting on my soapbox here but I am telling you 
it is out of control. Until we have transparency, we are never 
going to get this under control.
    This program is a good program but it lacks clarity and it 
lacks oversight, and we have got to do something about it.
    Mr. Chairman, I yield back.
    Mr. Murphy. Gentleman from Virginia for 5 minutes.
    Mr. Griffith. Thank you very much, Mr. Chairman. Thank you 
all for being here today to testify.
    Let me start with Ms. Draper. By the way, it is always nice 
to have you here and always love it when I see the Medical 
College of Virginia listed in your bio.
    Ms. Draper. Great school.
    Mr. Griffith. Great school. Yes, ma'am.
    This metric for qualifying DSH hospitals is an inpatient 
measurement yet 340B is for outpatient drugs. So does it make 
sense for us to use an inpatient metric for an outpatient 
program?
    Ms. Draper. Well, we do believe that that is one of the 
weaknesses of the DSH measure. The other is that it really--the 
formula is based on covered patients and that would be those 
covered by Medicare and Medicaid. So, there are weaknesses 
inherent in that measure.
    Mr. Griffith. That's just another one of the many stones 
you all have turned over and said, whoops, we can't see 
anything there.
    Ms. Draper. Yes.
    Mr. Griffith. Yes. And what is the DSH threshold? Do you 
know?
    Ms. Draper. Well, it ranges for different hospital types. 
For some hospitals, it is 8 percent--the DSH adjustment--and 
for others like the general DSH hospitals it is 11.75 percent. 
So that is another issue--whether or not that is an appropriate 
level or not and, again, that has been pretty consistent over 
time with the program.
    So, whether that needs to be reassessed that would also be 
a question.
    Mr. Griffith. Yes, ma'am. Thank you so much.
    Captain Pedley, earlier Ms. Draper referenced that prior to 
the shift or the change there were 1,300--and if I get the 
numbers wrong you all correct me--1,300 contract pharmacies 
with the various entities or hospitals and now there are 
19,000, if I wrote it down correctly when you said that 
earlier.
    I got all kinds of complicated questions on that that I 
have been given. But why the great expansion in the number of 
contract pharmacies? Is it just because we lifted the cap of 
one or how did that happen?
    Ms. Pedley. The 340B statute is silent on how these covered 
entities dispense and get these drugs to their patients. We had 
understood that through state law entities were contracting 
with pharmacies. So in recognition of that, we did develop 
guidance in 2010 that stated if they were going to have these 
contract pharmacies they needed to ensure they were also 
complying with the statutory requirements of diversion and 
duplicate discounts and we audit that information on those 
contract pharmacies when we go in to audit a covered entity.
    Mr. Griffith. All right. I am going to get to that in a 
second. But I have also heard that the contract pharmacies are 
not only allowed to charge a dispensing fee but some of them 
ask for part of the savings on the drug. Is that correct or is 
that incorrect?
    Ms. Pedley. I don't have the information on that. That's a 
business matter between the parties and their contract.
    Mr. Griffith. But it is not prohibited?
    Ms. Pedley. It is not prohibited.
    Mr. Griffith. OK. Now, let us get back to the audits. You 
have asked the hospitals to do the audits of the contracting 
pharmacies. When you go in and you check on those, obviously, 
you don't have enough people to check on 19,000 individual 
contracts with the various providers to the various entities. 
So have you uncovered problems and if you do, do you suspend 
somebody? Do you suspend the pharmacy or do you suspend the 
entity if they are not doing the proper oversight of the 
contracting pharmacies?
    Ms. Pedley. So we have audited now over 800 covered 
entities but it doesn't stop there. We also do conduct the 
audits within those of their contract pharmacies. So we have 
audited over 18,000 contract pharmacy arrangements related to 
those audits. We do ensure that the covered entity is providing 
oversight. We sample 340B drugs dispensed from those pharmacies 
to ensure that they have not been diverted or have a duplicate 
discount, and if we do find the entity is not providing 
oversight of those contract pharmacies we will remove the 
pharmacies from the program.
    Mr. Griffith. All right. Now, that raises an interesting 
issue. If you have done the audits, and you touched on 18,000 
contract pharmacies, those audits didn't reveal to you if some 
of them were getting a split of the savings with the entity?
    Ms. Pedley. That is a matter outside of our authority so we 
don't review it when we audit them.
    Mr. Griffith. OK. Would you like to have that authority? I 
mean, as long as we are going in to look at this, and it looks 
like it is a bipartisan way, should we give you that authority 
as well?
    Ms. Pedley. We would be happy to work with Congress on a 
specific proposal.
    Mr. Griffith. I appreciate that very much. Yes, ma'am.
    All right. I might be the last one up. I have got about 40 
seconds left. Anybody have something that they really want to--
--
    Mr. Carter. I do. I do.
    Mr. Griffith. I yield to the gentleman from Georgia. Oh, 
OK. I yield to the gentleman from Georgia, though.
    Mr. Carter. Dr. Pedley, I just want to make sure and 
understand. Most of the problems that you see, are they with 
the contracting pharmacies? Is it not true that most of the 
hospitals dispense these medications that are covered under 
340B through their own providers, especially with oncology? I 
mean, they dispense them out of the office.
    Ms. Pedley. It is a combination of their in-house pharmacy 
and whether they contract with pharmacies. I think, as you 
mentioned, it also depends on the types of drugs. But it is a 
combination of both.
    Mr. Carter. Thank you. I yield back.
    Mr. Murphy. I yield back to myself. OK.
    That being done, we are finished with the regular committee 
members. We have Mr. Welch, who, I assume, by unanimous 
consent, is allowed to participate today.
    So I recognize the gentleman from Vermont, Mr. Welch, for 5 
minutes.
    Mr. Welch. Thank you, Mr. Chairman, I appreciate it, and I 
thank the panel.
    A couple of things. One, Mr. Chairman, with respect to 
transparency, I am all on board. We need that across the board. 
Number two, with respect to whatever auditing has to be done in 
order to get our hands around this program, I am all for that 
and I think you are doing a good job.
    But I want to bring this back to what this means to rural 
Vermont and I think rural America. We are talking about the 
audit as though these nonprofit hospitals, like North Country 
Hospital in Newport, Vermont, is playing some kind of game and 
that just ain't the case. Folks there in a hospital are working 
hard, not making a lot of money, and are the vital community 
institution in Newport, Vermont.
    And I know, Mr. Chairman, you have got that and, Mr. 
Carter, I know you have that as well. They are focused on 
trying to get costs down. That is their focus, and that cost 
going down means that they can serve other people in this rural 
and pretty poor community.
    The pharma companies, frankly, are focused on shareholder 
profit. That is their job. But there is a tug of war here, and 
whatever it is we do--transparency, better audits--I do not 
want to compromise the ability of those rural community 
hospitals to do the job and get the services out to folks, and 
that has got to be the bottom line. For me, that is the bottom 
line. Rural America is getting hammered and it is not just 
Vermont.
    The other issue, Mr. Griffith, you and I worked on to some 
extent--the 340B issue where these orphan drugs get mislabeled 
and the pharmaceutical companies take advantage of the fact 
that there is an orphan designation for a small component of 
what the use of that drug is and then they get the higher price 
on everything--and I would hope that would be part of it.
    But just let me tell you about the North County Hospital. 
If we lost the 340B designation, that would be $2.7 million a 
year. That is what would happen to them. When Porter Hospital 
in Middlebury, Vermont--the nearest other hospital is about 40 
miles away--when the orphan drug rule change was made that cost 
them $500,000. That is big money in a rural community hospital.
    So that is the focus here--I think ultimately at the end of 
the day whatever we do in transparency and on the audit and 
oversight, the bottom line for me is those community hospitals.
    Commander Pedley, I do want to ask you about some of the 
challenges that you face in regulating in this area and share 
your best understanding of what you believe Congress intended 
when it enacted the provision on 340B.
    Ms. Pedley. In terms of regulatory authority, due to the 
district court ruling in 2014, the courts did hold that we only 
have explicit authority in three areas: that is related to the 
ceiling price, civil monetary penalties for manufacturers, and 
the administrative dispute resolution process.
    But we do not have that authority for all other areas of 
the program. We have developed guidance in those areas but we 
did propose in the budget to provide comprehensive regulatory 
authority for HRSA to oversee around.
    Mr. Welch. All right. Now, on the current application of 
the exclusion that has an effect on access to products in the 
340B, is that something you have the ability to track?
    Ms. Pedley. I am sorry. Did you say orphan drugs?
    Mr. Welch. Yes.
    Ms. Pedley. So related to orphan drugs, there was an 
amendment in the statute in 2010 that the newly eligible 
hospitals, mainly, rural hospitals, are unable to purchase 
orphan drugs under the program at the 340B discount.
    There was a lawsuit involving HRSA's interpretation related 
to that matter. Currently, under the program the policy is that 
the manufacturer does not have to provide the 340B discount to 
those newly eligible hospitals for drug----
    Mr. Welch. All right. Thank you.
    Ms. Draper, it is very nice to see you. Thank you.
    On the orphan drug issue, and the specific question of how 
many drugs have been recently pulled out of the program, is 
that something the GAO has reviewed?
    Ms. Draper. We have not reviewed that.
    Mr. Welch. That information would be helpful and important, 
given the anecdotal evidence about real access. Is that 
something you would agree with?
    Ms. Draper. I think anything that would help improve the 
transparency and integrity of the program would be good.
    Mr. Welch. OK. Thank you.
    I thank the panel. Mr. Chairman, thank you for allowing me 
to participate.
    Mr. Murphy. Thank you very much.
    That concludes this committee hearing. I would like to 
thank all the witnesses and members who have participated in 
today's hearing.
    I would remind members that they have 10 business days to 
submit questions for the record, and I ask that the witnesses 
all agree to respond promptly to those questions.
    Hearing nothing else, the committee is adjourned.
    [Whereupon, at 12:31 p.m., the subcommittee was adjourned.]
    [Material submitted for inclusion in the record follows:]
    
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