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Carter Introduces Legislation to Increase Transparency and Improve 340B Drug Discount Program for Patients

Congressman Earl L. "Buddy" Carter (R-Ga.) introduced legislation today to increase transparency and improve the 340B drug discount program for patients. 

The 340B drug discount program was created by Congress to provide front-end discounts on covered outpatient drugs purchased by specified providers, including some hospitals, that serve vulnerable patient populations.

For certain hospitals, 340B eligibility is determined partially by their Medicaid disproportionate share hospital (DSH) status, a formula based on a hospital’s share of low-income and uninsured patients.

Currently, DSH hospitals must report on their inpatient low-income utilization rate in order to qualify for state and federal DSH funds. However, the DSH formula bases eligibility on inpatient care that is provided to individuals with some form of insurance and does not capture all uncompensated care, especially those furnished in an outpatient setting.

Carter's legislation, the 340B Optimization Act, adds an additional layer of transparency in the program by requiring hospitals to report their low-income utilization rate for outpatient services in addition to their low-income utilization rate for inpatient services in both the main hospital and child site setting.

"I introduced this legislation today because I believe the 340B program is very important, but it needs to be improved," said Carter. "340B is an outpatient program and currently hospitals do not have to report low-income utilization in outpatient settings. This legislation adds an additional layer of transparency to allow us to better understand the patient makeup of DSH hospitals to improve the program and ensure it is truly being used in the most effective way for our nation's most vulnerable patients."

“Years of independent studies and investigations have uncovered that the 340B program is out of control in many hospitals and is not functioning to help patients in need," said Ted Okon, executive director, Community Oncology Alliance. "As Congress examines the 340B program and develops legislative solutions to fix 340B, it is critical that policymakers have the facts about the program. The 340B Optimization Act is smart legislation that will do just that – expose the facts about 340B hospitals’ patient populations and charity care. The Community Oncology Alliance (COA) applauds Congressman Buddy Carter for introducing this bill and being an advocate for patients, especially those battling cancer. COA welcomes the opportunity to work with Representative Carter and other members of Congress on strengthening the 340B program for generations of patients – especially those in need – to come.”

“The AIR340B Coalition applauds Representative Buddy Carter (R-GA-1) on his efforts to improve understanding of how hospitals are using the 340B program with the introduction of the 340B Optimization Act," said AIR 340B. "Representative Carter joins a growing bipartisan group of lawmakers introducing legislation and holding hearings to help fix the 340B program. This bill is another step in the right direction to modernizing the 340B program so that it helps vulnerable patients receive the care they need. We encourage all lawmakers to review this bill and will continue to work side-by-side with Congress and the Administration to bring this program back on track - helping the communities it was meant to serve.”

“BIO strongly supports the 340B Optimization Act," said BIO President & CEO Jim Greenwood. "We believe that it is past time to reevaluate whether Medicaid DSH is the best metric to determine 340B eligibility, and that we are sorely lacking in data—particularly outpatient data on low-income and uninsured patients—to determine the best way to maintain a viable 340B program that delivers care to the underserved.  We are proud to stand with Rep. Carter in support of this bill.”

"As oncologists caring for a significant portion of our nation’s cancer patients, The US Oncology Network appreciates Congressman Carter’s efforts to protect the integrity of the federal 340B drug discount program through the 340B Optimization Act which will increase transparency and accountability," said The U.S. Oncology Network.


The Health Rescources and Services Administration (HRSA) uses a hospital’s DSH adjustment percentage as one measure of eligibility to participate in the 340B drug discount program. Under current law, hospitals must report to the state on their Low-Income Utilization Rate (LIUR) in the inpatient setting to determine eligibility for a DSH payment. However, outpatient sites that are affiliated with a hospital do not affect the hospital’s DSH adjustment percentage as it is based solely on a hospital’s inpatient mix.

LIUR is an inpatient metric that is used for an outpatient program which does not properly reflect the number of uninsured low-income patients a hospital may see. 

The Medicare Payment Advisory Commission and the U.S. Government Accountability Office (GAO)have both questioned if Medicaid DSH is the best metric to examine the outpatient population of the hospital.

Additionally, the Energy and Commerce Committee found in the recent report on the 340B drug pricing program that “The current metric used to determine hospital eligibility for the 340B program does not necessarily reflect the amount of charity care offered by the hospital or the outpatient population for the hospital. Hospitals have a financial incentive to open child sites in areas that do not reflect the DSH percentage of the parent entity, thus enabling the hospital to gain access to a higher number of commercially insured patients.”