Proving the Absence of a Requirement: Use of Funds Derived from the 340B Program for Indigent Care
by Elizabeth “Issie” Karan

Recently, the Hemophilia Alliance team was asked to prove that funds generated from a HTC’s 340B Program are not required to be used exclusively to support charity care. Although this is not the first time we have been asked this question, demonstrating the lack of a requirement can be difficult. Below we summarize why the perception that 340B Program revenue must only be used for indigent care is false.

People with bleeding and clotting disorders are medically vulnerable, since lack of access to expert care and appropriate treatment can lead to life-threatening complications. To alleviate this burden, Congress created the national network of federally-supported HTCs, which receive grant funding under Section 501(a)(2) of the Social Security Act and from the CDC. With this funding, HTCs then can register with the Office of Pharmacy Affairs within Health Resources and Services Administration (HRSA) as a covered entity under the 340B Program.

Congress enacted Section 340B of the Public Health Service Act in 1992. While doing so, Congress stated in the congressional record that the 340B Program’s purpose is to allow covered entities to “stretch scarce Federal resources as far as possible, reaching more eligible patients and providing more comprehensive services.” (See H.R. REP. NO. 102-384, pt. 2, at 12 (1992), available at https://protect340b.org/wp-content/uploads/2018/05/HRReport-102-384-II-p-12.pdf)

Most HTCs participate in the 340B drug discount program. As supported by the legislative history of the 340B Program, HTC participation in 340B Program enables them to provide treatments at significant discounts to patients served by the center and to reinvest program income to support comprehensive care for all of the center’s patients. These funds are needed to support HTCs since they only receive $35,000 per year in federal funds, on average.

As a recipient or subrecipient of Federal grant, an HTC is subject to the requirements of 45 CFR Part 75. Revenue earned by the HTC that is directly generated by a grant supported activity, or “earned as a result” of the award is “program income,” including revenue from the 340B program. (45 CFR § 75.2) Under 45 CFR § 75.307, HTC program income must be added to federal funds and “must be used for the purposes and under the conditions of the Federal award.”

The Maternal Child Health Bureau (MCHB), which administers the HTC grant and also is housed within HRSA, determines the purpose and conditions of the HTC program through its grantmaking process. Therefore, program income can support any activity MCHB decides is within the scope of the grant. Such efforts may include those described in the Notice of Grant Funding, including, but not limited to, patient health, education, and supportive services necessary to provide comprehensive care to patients served by HTCs. While HTCs may use program income to provide care to indigent populations, many other allowable uses of program income exist, and HTCs have discretion to determine how best to meet the needs of its patients and their families and caregivers.