On February 10, 2020, the White House released the Administration’s budget proposal for Fiscal Year (FY) 2021, A Budget For America’s Future. This document summarizes the President’s recommendations for funding levels and legislative proposals throughout the federal government for the upcoming fiscal year, which begins on October 1, 2021. While the budget provides important insight into the Administration’s regulatory agenda and priorities, it remains a largely symbolic, political document. Congressional appropriators retain the power to apportion government funding, and leaders on both sides of the aisle have emphasized their intention to conduct the appropriations process on their own terms, abiding by the budget caps set last year in a bipartisan deal and hammering out agency funding levels within Congress.  

While these budget provisions are highly unlikely to be approved by Congress, there are two major proposals contained in the president’s budget that would impact the 340B Program. Details can be found within the Health Resources and Services Administration’s (HRSA) congressional budget justification document, which expands on the proposals in the President’s summary, available here. 

• The budget request would require covered entities to retain records of the net income obtained from 340B purchases and their use of such income (included in last year’s budget proposal). HHS would be authorized to audit these records. This proposal will likely be opposed by 340B advocates for three reasons.  First, they may take issue with how 340B income is measured in the proposal since it includes reimbursement received by covered entities. Reimbursement of 340B drugs is not regulated under the 340B program and, for this reason, covered entities believe it should be excluded from the calculation.  Second, covered entities assert that these data collection and reporting requirements are burdensome.  Third, covered entities complain that they are already reporting large amounts of financial data as a result of other federal and state laws.

• The proposal would also grant HRSA broad regulatory authority over all aspects of the 340B Program. Following a 2015 ruling that recognized HRSA’s limited regulatory authority, HRSA has repeatedly requested broader authority from Congress to regulate the 340B Program. 340B advocates may oppose this amendment because HRSA would likely use such authority to implement prior 340B guidance that has been viewed as overly restrictive of covered entity practices and as undermining the original congressional intent of the 340B statute.

• The budget proposes a user fee mechanism that would permit HRSA to collect a fee of 0.1% of each purchase of 340B drugs from participating covered entities based on sales data submitted by manufacturers. Note that several Administrations have included 340B user fees in their budgets and such proposals have never advanced in Congress.  These user fees would result in $24 million of new revenue, according to HRSA. The Department of Health and Human Services has frequently emphasized HRSA’s lack of resources to administer the 340B Program and would direct the revenue from these fees to improving HRSA’s program oversight capabilities. The budget proposes new statutory language to authorize the collection of these fees but would require Congress to enact such a provision.  340B advocates will likely oppose this proposal because it levies additional fees on resources that are already scarce for many covered entities. 

• The budget request includes $10.2 million in funding to the Office of Pharmacy Affairs, which is equal to the enacted level for FY 2020.

Powers will continue to monitor additional developments regarding these proposals as Congress undergoes the appropriations process for FY 2021.