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To Address COVID-19 Disparities, 340B Hospitals Need More Flexibility

By Sravya Chary

Many racial minorities and low-income individuals rely on 340B hospitals and associated child sites for access to discounted drugs and charity care.

In 1992, Congress enacted the 340B program as an avenue of access to prescription medication for “the nation’s most vulnerable patient populations.” Hospital savings incurred from purchasing 340B drugs at a steep discount are invested in charity care programs to enhance patient services and access to care.

The 340B program is an essential component of the COVID-19 response. Increased flexibility for 340B covered entities is necessary to address disparities faced by marginalized communities.

The Disproportionate Effect of COVID-19 on Racial Minorities

An ongoing study conducted by APM Research Lab, as of June 10, 2020, found that the death rate for Black Americans infected with COVID-19 is 2.3 times higher than the rate for Whites and Asians. In 30 states, Black people are dying above their population share, the study finds.

The Centers for Disease Control and Prevention (CDC) noted similar findings with regard to burden of illness. The April 17, 2020 CDC Morbidity and Mortality Weekly Report (MMWR) noted that in a sample size of 580 COVID-19 positive hospitalized patients, 33% of patients were Black; for reference, the community’s Black population share was 18%. This data suggests that there is an overrepresentation of Black Americans among hospitalized patients.

Racial Minority Reliance on the 340B Program

The CDC cites a number of factors that influence COVID-19 related disparities. One key factor is lack of health insurance coverage, which in turn leads to lower access to care. Black people in the U.S. are twice as likely to be uninsured and more likely to report not being able to see a doctor because of cost compared to their white peers.

Many low-income individuals, and especially those who are uninsured, rely on 340B hospitals for access to discounted drugs and care. Black and low-income Americans represent a higher percentage of 340B patients than other patient populations.

It is evident that 340B hospitals are a vital component of the COVID-19 response for racial minorities and low-income patients. However, as the pandemic progresses, 340B hospitals face growing treatment needs that are difficult to keep up with.

On April 14, Einstein Medical Center, a safety-net hospital in Northern Philadelphia serving individuals in one of the most impoverished cities among the ten largest cities in the country, announced that between March and June, it was on track to lose $70 million in revenue due to the extra costs associated with treating coronavirus patients.

This loss in revenue is not unique to Einstein Medical Center. Many 340B covered entities across the country are facing similar uphill battles as the pandemic progresses and are on the verge of closing as a result; this would have “devastating effects on [marginalized] communities.”

Further, the holes in the U.S. healthcare supply chain have forced hospitals to procure supplies on their own, which led to stockpiling among the economically stable hospitals and left safety-net hospitals behind.

As an added burden, millions of Americans have lost and continue to lose their jobs and their health insurance coverage, causing the volume of 340B patients to grow rapidly. These surges in patients cause entities to become reliant on affiliated offsite facilities for additional support. However, for new offsite facilities to have access to 340B drugs, a slow registration process is mandatory–a rate-limiting step in the entity’s COVID-19 response.

In a plea for assistance, the American Hospital Association (AHA) requested additional financial assistance and regulatory flexibility for 340B hospitals from the federal government and the Health Resources and Services Administration (HRSA) during the public health crisis. Unfortunately, the federal government has not provided enough support for 340B hospitals to effectively combat the pandemic. Although the Coronavirus Aid, Relief, and Economic Safety (CARES) Act, which was signed into law on March 27, 2020, provided some financial assistance for safety-net hospitals, it failed to provide these hospitals with adequate regulatory flexibility.

Added Flexibility for 340B Covered Entities

Given the failure of the CARES Act to provide adequate regulatory flexibility, HRSA granted increased flexibility for 340B covered entities on June 6, 2020.

The new guidance allows covered entities to use 340B drugs at affiliated offsite facilities before these locations are reported on the hospital’s most recently filed Medicare cost report and are registered in the online 340B Office of Pharmacy Affairs (OPAIS) database as a “child site” of the covered entity. This gives new hospital outpatient departments (HOPDs) access to 340B drugs up to 22 months earlier than the former process. HRSA announced that this flexibility is permanent.

The added flexibility has the potential to remove systemic barriers to coronavirus treatment, as it allows 340B patients to access 340B discounted drugs earlier and at a greater number of facilities. It can possibly alleviate the burdens associated with high healthcare costs, transportation barriers, and resource allocation problems. This is especially true in rural areas.

Although the potential for benefit is evident, it is important to assess if this added flexibility has a net positive outcome on the 340B patients served by the associated HOPDs.

Potentially Beneficial Added Flexibilities

Granting offsite facilities access to 340B drugs before formal registration as a “child site” allows 340B patients to access necessary treatment as promptly as possible. This is one positive step toward equalizing the coronavirus response for marginalized communities. However, more flexibility is necessary.

In a letter to Human Health Services Secretary Alex Azar, 340B Health asked the department to take actions to increase flexibility for 340B hospitals. Outstanding items are presented as follows: suspend the Medicare Part B payment reduction to 340B entities and temporarily waive Medicare disproportionate share (DSH) adjustment percentage requirements so 340B hospitals do not lose eligibility status. In a separate letter to HRSA, 340B Health requested the agency suspend all auditing of 340B covered entities during the duration of the pandemic.

These actions comprehensively protect 340B hospitals’ status and provide them with more time and funds to effectively combat COVID-19.

Auditability and Compliance

Although some flexibility has been granted to 340B covered entities, it is imperative that these hospitals remain compliant with 340B program policies to ensure long-term sustainability of the added potential benefits for the 340B patient population. 340B outpatient facilities should maintain auditable records, avoid duplicate discounting, dispense 340B drugs solely to eligible patients, and be registered in OPAIS as soon as they are included on the respective covered entity’s filed Medicare cost report.

The coronavirus pandemic leaves 340B patients particularly vulnerable. HRSA should explore more 340B program flexibilities to reduce some of the uncertainties and disparities faced by these communities. In the future, analysis may provide insights as to whether these added flexibilities improved outcomes for Black, Indigenous, and low-income communities during the pandemic.


The above opinions are wholly my own and in no way represent the opinions of my affiliated institutions.

Sravya Chary

Sravya Chary is a manager in the pharmaceutical industry, a Master of Bioethics (MBE) candidate at Harvard Medical School, and a Petrie-Flom student fellow for the 2020-2021 academic year.

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