Introduction
A policy analysis process entails identification of a problem or issue, identification of appropriate solution, and development of adoption strategy. The identification, analysis, and presentation of solutions to social and public health challenges to policymakers is thus referred to as policy analysis. In this case, the paper evaluates the Federal 340B Drug Pricing Program, identifying the policy processes necessary to improve the policy. The 340B Drug Pricing Program enables eligible clinics and hospitals to provide prescription drugs at discounted prices to low-income and uninsured patients. It is intended to help healthcare providers stretch their finances to reach financially vulnerable patients and deliver compressive services. Policy analysis to ensure appropriate reimbursement strategy is applied and providers adhere to the program’s intent is necessary to resolve the transparency and oversight disputes raised by drug manufacturers. The policy analysis is essential for identifying and describing policy options to address public health problems, and understanding policy potential health, economic and budgetary impacts, and identifying evidence-based policy solutions and gaps in the evidence base.
The ability to compile best practices, evaluate relevant literature, analyze current policies to determine where new ones are needed, spot gaps in or conflicts between policies, and keep abreast of the program are key competences for policy analysis. Evidence is used to guide a policy process at every stage, from policy analysis to identifying problems that need policy solutions. It involves lobbying, conversation, deliberation and formation of public policy, implementation, and monitoring and assessment of that policy ( Browne et al., 2018). Typically, these processes are thought of as consisting of sequential steps below:
- Verify, define, and detail the problem
- Establish evaluation criteria
- Identify alternative policies
- Assess alternative policies
- Display and distinguish among alternatives
- Implement, monitor, and evaluate the policy
The policy process, in simplified form, can be understood as a sequence of four phases: agenda setting, formulation, implementation, and evaluation. In this context, the selected policy analysis processes are organized into 1) defining and analyzing the problem, 2) identifying alternative policies, 4) assessing alternative policies, and 4) displaying and distinguishing among them.
Background of the 340B Drug Pricing Program Case Study
The program has grown significantly since its creation in 1992 to include more healthcare providers eligible to participate and increase the volume of drugs purchased through the program (Coukell & Dickson, 2018. Nevertheless, not everyone is happy about its growth, particularly drug makers, providers, and federal policymakers that have challenged it through a series of legal battles. Recently, a Supreme Court addressed a dispute between hospitals and the U.S. Department of Health and Human Services (HHS) regarding reimbursement for drugs dispensed through the 340B program (Cole et al., 2022). Although the case was resolved, disagreements and many other issuers remain unresolved.
Policy Processes Utilized in the Research
Problem Definition and Analysis
The first step in policy analysis is defining and analyzing the problem. It entails identifying the problem faced, where it exists, and the people affected. The process ensures that an entity systematically chooses the best choice for a situation. People who can give or interpret information regarding the policy, individuals who will be impacted by the policy, and those in charge of managing resources linked to the policy are frequently involved in the analysis process (Pogrmilovic et al., 2019). For instance, subject matter experts, community partners, and economists can provide or interpret information needed in policy analysis. Community members, partners, and local decision-makers are examples of people whose jobs or lives might be affected by a policy. As a result, they offer contextual information, such as possible social, academic, and cultural viewpoints ( Browne et al., 2018). Public officials and administrators also play a vital role in policy analysis. For example, they help analyze policy options’ economic and budgetary impacts or the legal landscape around potential policies.
Due to its rapid expansion, drug companies have become concerned about the 340B program. Data released by Health Resources & Service Administration indicate that discounted purchases under the 340B program reached $44 billion in 2021, 16% more than in 2020 (Clark & Puthiyath, 2022). The Affordable Care Act (ACA) of 2010 is partly responsible for the significant growth due to the expanded number of eligible organizations in the 340B program. Changes to the policy to allow clinics and hospitals to use an unlimited number of contract pharmacies instead of one (Clark & Puthiyath, 2022). The fact that contract pharmacies are owned or operated by third parties and not 340B-covered entities has raised controversy among pharmaceutical companies. The pharmaceutical companies argue that the law establishing the 340B program failed to explicitly permit the contracting arrangements, which they claimed has contributed to increased cost or loss of revenue for drug makers.
Pharmaceutical companies further assert that 340B program operations lack transparency and oversight. For instance, drug makers have raised questions about whether the savings received from discounted drugs are used to lower healthcare costs or increase providers’ profits. The transparency and oversight issues have made drug makers impose extra conditions on hospitals and clinics enrolled in the 340B program (Coukell & Dickson, 2018). For example, drugmakers notified providers that only designated contract pharmacies per hospital would be recognized (Cole et al., 2022). Besides, other pharmaceuticals require enrolled entities to submit drug claims data to receive discounted prices (Cole et al., 2022). The primary concern of drug makers is the application of duplicative discounts and the failure of providers to adhere to the program’s intent. Healthcare providers have also defended themselves on the issue, providing counterclaims. Providers have pointed out that significant care provided to uninsured Americans goes uncompensated.
Policy Alternatives
Generating alternatives entails creating many options and reducing them to a manageable size. Policy alternatives require consideration of what may be possible under different circumstances. For instance, one can consider the status quo, no-action alternative, or redefine the problem if necessary. Generally, identifying policy alternatives is a form of benchmarking against the current policy. The section highlights policy options suitable for dealing with transparency and oversight issues.
The potential of duplicate discounts in the 340B program has been a significant challenge, which increased with more covered entities and contract pharmacies. The Government Accountability Office (GAO) and Office of Inspector General (OIG) recommended the expansion of Health Resources and Services Administration (HRSA) audits to combat the duplicate discount issue (Mulligan, 2021). The Department of Health’s HRSA is the organization in charge of overseeing and running the 340B program. The plan calls for HRSA to verify that state Medicaid regulations are being followed and mandates that covered entities collaborate with medication makers to pay for managed Medicaid (MCO) duplicate discounts (Mulligan, 2021). However, few changes have been implemented in reducing duplicate discounts since HRSA lacks regulatory authority over MCO plans besides inadequate resources to expand its audits. Others have suggested creating a national clearing entity that could be run either publicly or privately (Mulligan, 2021). The national clearing institution could help identify claims in MCOs and remove them from Medicaid drug rebate claims to solve the duplicate discount concerns.
Hospitals and clinics are responsible for monitoring their contracted pharmacies, which includes keeping audit records, carrying out annual audits, and reporting any inconsistencies discovered to HRSA. However, it is uncertain how many contract pharmacy agreements there are overall because covered firms are not required to file contracts as part of the HRSA registration procedure (Daifotis, 2022). Contract pharmacies serve both patients of covered entities and non-340B providers, which makes it more difficult to identify prescriptions covered by 340B. Additionally, contract pharmacies raise the possibility of medication diversion, which happens when patients who are not 340B qualified receive 340B drugs (Mulligan, 2021). Therefore, contract pharmacies should correctly determine which patients and medications are 340B eligible, including by enlisting the aid of third-party administrators.
There have been some recommendations to reduce the number of contract pharmacies, especially for hospitals. Mulligan (2021) asserts that the overall number of contract pharmacies may depend on the geographic boundaries, size, insurance coverage, or economic distribution of their patient base. In a similar vein, Congress might change the law to mandate that covered entities negotiate charity care contracts with contracted pharmacists and set their reimbursement rates in accordance with fair market prices (Mulligan, 2021). The proposal can ensure only low-income uninsured patients benefit from the 340B program besides enhancing transparency. Additionally, better program monitoring would result from transparency into the 340B prescription money flow and fee structures between covered companies, contract pharmacies, and regulatory bodies like HRSA.
The increasing number of entities enrolled in the 430B program raised concerns over shifting prescribing behavior to improve profitability. There is proof that hospitals (DSH) near the 340B eligibility cut-off may alter their patient mix to participate in the 340B program (Mulligan, 2021; Desai & McWilliams, 2018). Although it is not specifically forbidden, altering the patient mix goes against the 340B program’s primary goal of helping low-income people. The suggested solution to address the issue has included two-year freezing on the new hospital registration and caping the total number of participants after attaining eligibility. Furthemoree, transparency might be improved by more stringent reporting requirements for 340B revenue, 340B patient mix broken down by payer type, contract pharmacies and vendors, and annual reports on Medicaid claims relating to 340B.
Assessing the Alternatives
Assessing Policy alternatives entails identifying which policy should be adopted. The process requires examining each policy alternative and applying the selected decision criteria. For instance, each option is examined by evaluating its efficiency, cost, political acceptability, and how it will affect equity. The process is repeated for each alternative, including the no-action alternative. The proposed alternative aim is to improve transparency and oversight in the reimbursement of discounted drugs.
Policy recommendations to expand HRSA audits over MCOs may be infeasible because it lacks authority over MCOs and the capacity to extend audits. Therefore, little can be done in duplicate discount oversight using the HRSA expanded audit approach. Establishing a national clearing house could be a viable solution to curbing duplicate discounts. For example, a publicly or privately managed and funded national clearing house could provide a centralized view for identifying claims in MCO plans and removing them from Medicaid rebate claims. The correct identification of patients and prescriptions that qualify for 340B could stop drug diversion and improve transparency if contract pharmacies are required to do so. However, insufficient contract pharmacy oversight by covered entities is still a limiting factor (Mulligan, 2021). Mulligan (2021) noted that HRSA currently lacks the ability to regulate contract pharmacies and has not released any guidelines for oversight. Besides, the HHS deemed additional regulations too cumbersome for covered entities, making additional oversight of contract pharmacies unlikely.
Limiting the total number of contract pharmacies based on geographical proximity to covered entities or size and income distribution of patient populations seems a plausible option. Distance from the covered entity to the contracted pharmacy can provide a definitive link with the local community and possible association with the large population of the program. A spirit of goodwill can be instilled by changing the law such that covered hospitals or clinics must create charity care agreements with contracted pharmacists and base their payments on fair market value.
The freedom of structure between covered companies, contract pharmacies, and agencies as well as insight into the 340B prescription money flow are essential for compliance with the program’s original objective. Additionally, adjusting the eligibility of new hospitals and capping the total number of participants can capture the degree to which hospitals serve the low-income population. It includes stricter reporting requirements, such as 340B revenues, 340B patient matrix broken down per type, arrangements with contract pharmacies and vendors, and annual reports on Medicare claims subject to 340B.
Display and Distinguish among Alternatives
The sections highlight the most desirable policy options considering the circumstances and evaluation criteria. After an alternative assessment, concluding policy action is desirable and strongly advocating a position on the issue. It entails summarizing the essential findings, drawing conclusions about the relative merits of competing proposals, and leaving the choice of policy action to policymakers. The following policy recommendations would help improve the transparency in reimbursement claims and enable the 340B program to serve its true purpose:
- Establishing public or private national clearing house for centralized identification of claims in MCO plans and removal of Medicaid rebate claims.
- Contract pharmacies must accurately classify clients and medications that qualify for the 340B program.
- Limiting the total number of contract pharmacies based on geographical proximity to covered entities or size and income distribution of patient populations.
- The law be changed to mandate that covered hospitals or clinics create charity care contracts with contracted pharmacists and establish their payments in accordance with fair market value.
- Imposing a two-year hold on newly registered hospitals, limiting the number of participants, and gradually modifying eligibility.
Key emphasis on systematic measures to improve 340B claims tracking and program integrity to address all underlying issues that may surface after implementing the policies. For instance, a private sector solution may help reduce discounts or drug diversion, but it may also likely introduce intermediaries. Intermediaries can ultimately profit from 340B funds to cover hospitals or clinics, presenting more challenges to an already complex 340B landscape. Primarily, the lack of trust by drug manufacturers has been the main concern that needs to be addressed adequately. Drug manufacturers have had to take severe efforts to reduce their vulnerability to diversion and duplicate discounts due to the lack of legislative change, the complexity, and the scant regulation of the 340B program. Some drastic measures adopted by the companies included restricting the distribution of 340B-priced products to covered entities or contract companies.
Other Policy Processes Not Utilized in the Research
Establishing Evaluation Criteria
Establishing evaluation criteria is the second step in the policy analysis process. Evaluation criteria are specific dimensions of policy objectives used to evaluate alternatives. It is often addressed in measurable terms, such as effectiveness, cost-benefit and efficiency, equity, and ethics. Political viability, social acceptability, administrative viability, and technical viability are other measures of the evaluation criteria. Some criteria will be more appropriate for a given problem than others, no matter the list of potential criteria developed by a researcher.
Applicable criteria include technical feasibility, efficiency, social acceptability, and ethics. For instance, the HHS responsible for oversight lacks the technical capability to expand oversight over all the covered entities and contract pharmacies. It offers insight into the technical feasibility issues affecting the capacity of HHS to enforce compliance among the stakeholders in the 340B program. Compromised efficiency and lack of ethics are reasons contracting pharmacies and covered hospitals or clinics have exploited weaknesses in the program policy to derive undue benefits. Therefore, evaluating the efficiency and ethical criteria offers a broader dimension to dissecting the policies and identifying potential areas that require modification.
Implement, Monitor, and Evaluate the Policy
The last step in the policy analysis process is drawing, monitoring, and evaluating the policy. It entails drawing up a map for implementation, designing a monitoring system, and suggesting designs for policy implementation. The process helps determine whether the policy was implemented correctly and whether it had the intended effect. It makes it easier to establish and carry out policies that are supported by evidence, which increases accountability and openness. Besides, this process is essential for demonstrating achievements towards policy objectives and assessing its achievements, efficiency, results, and impact. For example, the recommended policies would succeed if they maintain constructive links between the policy stakeholders in the 340B program, including improving transparency and oversight of the reimbursement process.
Conclusion
The 340B program has provided covered entities with funds to support their operations, but whether the discounts are utilized with the program’s true intent remains controversial. Vaguely worded legislation coupled with the limited regulatory authority of the HRSA leaves an open for interpretation policies that offer little meaningful oversight. Hospitals, pharmaceutical companies, and contract pharmacies will probably continue to push the 340B program’s limits unless Congress changes it (Daifotis, 2022). Necessary modifications could include requiring hospitals and pharmacies to develop charity and payment arrangements, limiting contract pharmacies based on geographical proximity to the target population, and requiring contract pharmacies to identify patients and prescriptions in the program correctly. Other measures could entail establishing a national clearinghouse for centralized control, imposing a two-year moratorium on new hospital registrations, and capping the total number of participants per covered entity. Congressional reform efforts must consider all the highlighted perspectives to modify the program sustainably.
References
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