Department of Health and Human Services 

OFFICE OF 

INSPECTOR GENERAL 

Inspector General 

June 2004 

OEI-05-02-00071 

DEFICIENCIES IN THE 340B DRUG 

DISCOUNT PROGRAM’S DATABASE 
Office of Inspector General
 http://oig.hhs.gov 

The mission of the Office of Inspector General (OIG), as mandated by Public Law 95-452, 

as amended, is to protect the integrity of the Department of Health and Human Services 

(HHS) programs, as well as the health and welfare of beneficiaries served by those 

programs. This statutory mission is carried out through a nationwide network of audits, 

investigations, and inspections conducted by the following operating components: 

Office of Audit Services 

The OIG's Office of Audit Services (OAS) provides all auditing services for HHS, either by 

conducting audits with its own audit resources or by overseeing audit work done by others. 

Audits examine the performance of HHS programs and/or its grantees and contractors 

in carrying out their respective responsibilities and are intended to provide independent 

assessments of HHS programs and oper ations in order to reduce waste, abuse, and 

mismanagement and to promote economy and efficiency throughout the department. 

Office of Evaluation and Inspections 

The OIG's Office of Evaluation and Inspections (OEI) conducts short-term management 

and program evaluations (called inspections) that focus on issues of concern to the 

department, the Congress, and the public. The findings and recommendations contained 

in the inspections reports generate rapid, accurate, and up-to-date information on the 

efficiency, vulnerability, and effectiveness of departmental programs. The OEI also 

oversees State Medicaid fraud control units, which investigate and prosecute fraud and 

patient abuse in the Medicaid program. 

Office of Investigations 

The OIG's Office of Investigations (OI) conducts criminal, civil, and administrative 

investigations of allegations of wrongdoing in HHS programs or to HHS beneficiaries 

and of unjust enrichment by providers. The investigative efforts of OI lead to criminal 

convictions, administrative sanctions, or civil monetary penalties. 

Office of Counsel to the Inspector General 

The Office of Counsel to the Inspector General (OCIG) provides general legal services to 

OIG, rendering advice and opinions on HHS programs and operations and providing all 

legal support in OIG's internal operations. The OCIG imposes program exclusions and 

civil monetary penalties on health care providers and litigates those actions within the 

department. The OCIG also represents OIG in the global settlement of cases arising 

under the Civil False Claims Act, develops and monitors corporate integrity agreements, 

develops model compliance plans, renders advisory opinions on OIG sanctions to the 

health care community, and issues fraud alerts and other industry guidance. 
'''''C''. 

.(i' "J(J 

DEPARTMENT OF HEALTH &. HUMAN SERVICES Office of Inspector General 

Washington , D. C. 20201 

JUN 1 4 2004 

TO: Elizabeth M. Duke, Ph. 

Administrator, e Ith Res nd ces Administration 

FROM: George Grob 

Assistant Deputy Insp ctor General 

for Evaluation an nspections 

SUBJECT: OIG Final Reports: "Appropriateness of 340B Drug Prices 

OEI -05-02-00070 

Deficiencies in the 340B Drug Discount Program s Database 

OEI -05-02-00071 

The attached final inspection reports focus on the administration of the 340B Drug Discount Program. We conducted these inspections because of concerns about the 

appropriateness of prices that 340B covered entities are paying for outpatient drugs 

and the efficiency of the program s administration. 

Appropriateness of 340B Drug Prices (OEI-05-02-00070) reveals that entities

participating in the 340B Drug Discount Program did not receive the correct 

discount for 31 percent of sampled drug purchases made in September 2002. Based 

on this sample, we estimate that 340B entities spent $41.1 milion more that month 

on prescription drugs. The Health Resources and Services Administration (HRSA) does not have a process for ensuring that entities enrolled in the program receive the 

appropriate discount. Moreover, entities do not have information needed to verify 

that they pay the statutory price. Lastly, there is no match of HRSA' s 340B ceiling price data to the manufacturers' data to detect and resolve discrepancies upfront. 

To improve the integrity of the 340B program, HRSA should spot check entity-level 

transactions. HRSA should also seek legislative authority to establish penalties for 

violations of the Public Health Service Act (PHS Act). We also recommend that 

HRSA provide entities with data to approximate their discount. Finally, HRSA should verify their 340B prices against the manufacturers' prices. 

In the agency response, HRSA agreed with the objectives of our recommendations. 

HRSA stated it is considering a number of activities in an effort to achieve 

systematic monitoring of manufacturer compliance with the pricing formula in the 

340B statute. We look forward to receiving the results of these efforts. HRSA does 

not support our final recommendation to develop a legislative proposal to establish 

penalties for violations of the 340B statute at this time, and prefers to evaluate the impact ofthe ultimate action plan before taking legislative action. We understand 
Page 2 - Elizabeth M. Duke , Ph. 

this approach, but believe that the abilty to impose fines and civil penalties is

essential in ensuring that entities receive the full 340B discount. 

Deficiencies in the 340B Drug Discount Program's Database (OEI-05-02-00071) found that the poor qualty of the Pharmacy Mfairs Branch' s database interferes 

with the successful administration of the 340B Drug Discount Program. The

database s quality is deficient in three ways. First, 38 percent of our sampled entities were listed as enrolled in the 340B database, but reported not participating in the program. Second, the addresses for 43 percent of sampled entities from the

340B database were incorrect. Third, the 340B database also excludes essential 

billing and shipping information needed to verif a shipment's destination. 

According to interviews with nine major pharmaceutical corporations, incorrect

information contained in the database undermines their efforts to prevent ilegal 

sales of discounted products to ineligible entities. 

To improve the integrity of the database, HRSA should develop a strategic plan to 

better manage the 340B program data. We suggest HRSA's plan include: (1) a revalidation of all current information in the database; (2) an annual recertification

process for entities participating in the discount program; (3) a separate listing of newly added or deleted entities; (4) a standard reporting format for entities 

addresses; and (5) an additional field to designate entities with contracted pharmacy 

arrangement. 

HRSA' s comments describe the action already taken to improve the integrity of the 

340B database, but mention the impact budgetary limitations have on the agency 

ability to commit to a timetable for full implementation. We encourage HRSA to optimize its Pharmacy Services Support Center contract as a means to move toward 

complete action. Concurrently, we anticipate that HRSA wil determine if a Federal 

Recister notice to announce a new annual certifcation requirement is necessary. 

Please send us your final management decision, including any action plan, as appropriate, within 60 days. If you have any questions, please do not hesitate to call

me or one of your staff may contact Elise Stein, Director, Public Health and Human 

Services Branch, at 202-619-2686 or through e-mail (Elise.stein oig.hhs.govl To 

faciltate identification, please refer to report numbers OEI -05-02-00070 and 

OEI -05-02-00071 in all correspondence. 

2 Attachments

Final Report - "Appropriateness of 340B Drug Prices " OEI - 05-02-00070

Final Report - "Deficiencies in the 340B Drug Discount Program s Database

OEI -05-02-00071 
� ABSTRACT 
 

Section 340B of the Public Health Service Act (the PHS Act) created the 

340B Drug Discount Program to lower drug prices for over 10,500 

entities, including community health centers, public hospitals, and 

various Federal grantees. The Health Resources and Services 

Administration’s (HRSA’s) Pharmacy Affairs Branch (PAB) administers 

the program for the 10,500 enrolled entities, estimated to spend $3.4 

billion on drugs in 2003. 

The PHS Act required PAB to maintain an electronic listing of all the 

entities enrolled in the 340B discount. Pharmaceutical manufacturers 

refer to the listing to verify entities’ eligibility for the discount and to 

ensure that their drugs are only shipped to legitimate sites. Due to the 

importance of the database, we reviewed the quality and timeliness of 

its information. 

We found that the poor quality of the Pharmacy Affairs Branch’s (PAB) 

database interferes with the successful administration of the 340B Drug 

Discount Program. Thirty-eight percent of our sampled entities were 

listed as enrolled in the 340B database, but reported not participating 

in the program. The database also had incorrect addresses for 43 

percent of sampled entities. We also found that the database does not 

provide essential information on the entities’ billing and shipping 

arrangements. According to interviews with nine major pharmaceutical 

corporations, the extent of incorrect addresses listed in the database 

hinders their ability to effectively identify entities eligible for the 

discount program. 

We recommend that HRSA develop a strategic plan for improved 

management of the 340B database. We suggest this plan include: 

(1) a revalidation of all current information in the database (2) an 

annual recertification process for entities participating in the 

discount program (3) a separate listing of newly added or deleted 

entities (4) a standard reporting format for entities’ addresses and 

(5) an additional field to designate entities with contracted 

pharmacy arrangement. 

OEI - 05 - 02 - 00071 DEFICIENCIES IN THE 340B D RUG DATABASE i 
� EXECUTIVE SUMMARY 
 

OBJECTIVE 

To assess the accuracy of information contained in the Pharmacy Affairs 

Branch (PAB) 340B Drug Discount Program's database. 

BACKGROUND 

The PAB in the Health Resources and Services Administration (HRSA) 

is required to maintain a complete listing of all entities participating in 

the 340B Drug Discount Program for pharmaceutical manufacturers 

and wholesalers to use in verifying an entity’s eligibility to receive the 

discount. It is crucial that the roster contain exact information on the 

identity of the entities because it is the source wholesalers and 

manufacturers consult to verify the entity’s participation in the 

program, as well as its address. This inspection stems from 

complications faced while attempting to extract a sample of providers 

from the database for the inspection entitled "Appropriateness of 340B 

Prices" (OEI-05-02-00070). Given the importance of the database, we 

examined the integrity of the database and assessed the effects that 

errors had on our work, as well as other end users. 

FINDINGS 

Thirty-eight percent of sampled entities are incorrectly listed in the 

340B database as participating in the 340B Drug Discount Program. 

Despite being listed in the 340B database as “participating” in the 340B 

Drug Discount Program, 38 percent of our sample reported “not 

participating.” Manufacturers reported that the correctness of an 

entity’s eligibility status in the 340B database interferes with an 

entity’s ability to purchase drugs at the 340B price. 

The 340B database had incorrect address information for 43 percent 

of sampled entities. Forty-three percent of the entities sampled from 

the 340B database were listed with incorrect addresses. Incorrect 

information in the database hinders pharmaceutical manufacturer’s 

ability to verify entity enrollment and increases the risks for diversion. 

The 340B database does not provide essential information on 

entities’ billing and shipping arrangements. Manufacturers reported 

that the absence of fields in the database that list both an entity’s 

billing and a shipping address hinders their ability to verify that their 

OEI - 05 - 02 - 00071 DEFICIENCIES IN THE 340B D RUG DATABASE ii 
EXECUTIVE SUMMARY 

discounted products are going to eligible sites. The current design of the 

database only lists one address, but because of complex drug delivery 

and contracted pharmacy arrangements, the address listed may not be 

where the bill is sent or where the product is shipped. 

RECOMMENDATIONS 

To ensure accurate information on entities’ participation and 

location status, HRSA should develop a strategic plan for managing 

340B program data that: 

� revalidates all of the current information in the database 

�	 requires all enrolled entities to resubmit their 340B registration 

forms to PAB annually 

�	 creates a separate listing of entities newly added or deleted from the 

roster each quarter to facilitate the efficient transmission of 

information to the manufacturers 

�	 establishes a standard format for reporting entities' addresses, 

which clearly identifies the appropriate “ship to/bill to” 

arrangements and does not include post office boxes 

�	 creates a field that designates entities with a contracted pharmacy 

arrangement 

AGENCY COMMENTS 

HRSA’s comments describe the action already taken to improve the 

integrity of the 340B database, but mention the impact budgetary 

limitations have on the agency’s ability to commit to a timetable for 

full implementation. We encourage HRSA to optimize its Pharmacy 

Services Support Center contract as a means to move toward complete 

action. Concurrently, we anticipate that HRSA will determine if a 

Federal Register notice to announce a new annual certification 

requirement is necessary. 

OEI - 05 - 02 - 00071 DEFICIENCIES IN THE 340B D RUG DATABASE iii 
� TABLE OF CONTENTS 
 

ABSTRACT ................................ ....................... i
 

EXECUTIVE SUMMARY ................................ ......... ii
 

INTRODUCTION ................................ .................. 1
 

FINDINGS ................................ ........................ 4
 

Database contains inaccurate entity addresses................................. 4
 

Database includes non-participating entities .................................... 5
 

Database does not include complete address information ............... 5
 

RECOMMENDATIONS ................................ ............ 7
 

AGENCY COMMENTS ................................ ............ 8
 

APPENDIX ................................ ........................ 9
 

Appendix A: Agency Comments ........................................................ 9
 

ACKNOWLEDGMENTS ................................ .......... 12
 

END NOTES ................................ ..................... 13
 
� INTRODUCTION 
 

OBJECTIVE 

To assess the accuracy of information contained in the Pharmacy Affairs 

Branch 340B Drug Discount Program’s database. 

BACKGROUND 

This report stems from complications faced while attempting to use the 

340B Drug Discount Program database of participants for the inspection 

entitled "Appropriateness of 340B Prices" (OEI-05-02-00070). Efforts to 

conduct a review of Health Resources and Services Administration’s 

(HRSA’s) management of the 340B program were compromised by the 

poor quality of the database. Because the success of the 340B program 

depends on the accuracy of the information contained in the database, we 

evaluated the overall condition of the database. This report demonstrates 

the effects that deficient data has on the ability of the 340B Drug 

Discount Program to operate efficiently. 

The 340B Drug Discount Program 

In 1992, Congress enacted Section 340B of the Public Health Service Act 

(the PHS Act), establishing the 340B Drug Discount Program. This 

Federal discount program requires pharmaceutical manufacturers to 

lower outpatient drug prices for over 10,500 qualified Federal grantees, 

including community health centers and public hospitals. To calculate 

the 340B price, manufacturers adhere to a formula stipulated in the PHS 

Act. The 340B price is a ceiling price, meaning it represents the highest 

price the entity may be charged for that product, but does not limit sales 

below the calculated price. 

HRSA’s Pharmacy Affairs Branch (PAB) administers the 340B Drug 

Discount Program. The 340B participating entities are estimated to 

spend $3.4 billion for outpatient drugs in 2003. 

The 340B Participant Database 

Section 340B requires PAB to “maintain accessible data on the identity of 

participating entities.” In 1993, PAB created an electronic bulletin board 

representing the registration and certification of eligibility. Although an 

entity may be eligible to participate in 340B by virtue of the grant it 

receives, it must notify PAB of its intention to participate in the discount 

program by completing and submitting the “340B Program Registration 

Form for Covered Entities.” Eligible entities must also commit to 

avoiding duplicate discounts or rebates, preventing drug diversion and 

providing the Health and Human Services’ (HHS) Secretary and 

OEI - 05 - 02 - 00071 DEFICIENCIES IN THE 340B D RUG DATABASE 1 
INTRODUCTION 

manufacturer access to its records related to its compliance with 340B 

requirements. 

Once PAB receives, verifies, and processes the registration form, the 

entity is listed in the electronic database and is eligible to purchase drugs 

at the 340B price. The PAB Web site stresses the importance of entities 

supplying the agency with accurate and up-to-date information, 

particularly the exact name and street address. PAB states that, “It is 

the responsibility of each covered entity to contact the PAB with any 

changes.” 

The 340B Drug Discount Program’s database is intended to serve as a 

centralized source of contact information for those entities registered to 

participate in the discount program. The database lists the facility name, 

address, type of entity, date added to the database, and date terminated 

from participation. 

It is crucial that the roster contain exact information on the identity of 

the entities because it is the source wholesalers and manufacturers 

consult to verify the entity's participation in the program, as well as its 

address. Manufacturers need to confirm that the entity's reported 

address matches that in the 340B database before shipping the 

discounted drugs. Furthermore, an accurate database helps prevent 

potential diversion of drug products. 

Any incorrect information in the database compromises both the 

participants and the manufacturers. If the contact information on an 

eligible entity is wrong, a manufacturer may have to delay shipping the 

product until it can verify the correct information. If an entity is eligible 

for the discount, but is not listed, they could be overcharged because 

manufacturers do not have to offer the 340B discount. 

Conversely, manufacturers may face other consequences if their products 

are sold to ineligible clinics at the 340B price. The integrity of the 340B 

program is weakened if prohibited transactions occur. For example, if a 

manufacturer discovers sales to entities not eligible for the 340B discount 

or to entities that are eligible to enroll but have yet to do so, the 340B 

contract is violated, damaging the reputation of the program. 

In addition, if a manufacturer sells a drug at the 340B price to a noneligible entity, it may accidentally set a “best price” (BP), which is part of 

the formula used to calculate a manufacturer's rebate owed to the State 

Medicaid agencies. Manufacturers must report their lowest selling price, 

or BP, each quarter to the Centers for Medicare & Medicaid Services 

OEI - 05 - 02 - 00071 DEFICIENCIES IN THE 340B D RUG DATABASE 2 
INTRODUCTION 

(CMS) for the purpose of the Medicaid Drug Rebate Program. Sales to 

340B entities are exempt from this calculation. 

PAB estimates that participation in the 340B discount program is 

growing at an annual rate of 12 percent. The program’s rapid growth is 

partially due to the HHS’s pharmacy demonstration projects that allow 

entities to develop new ways to purchase drugs and serve patients. In 

addition, the President's Community Health Center expansion initiative, 

which plans to add 1,200 new and expanded health center sites eligible 

for the 340B discount, will significantly impact the number of eligible 

participants, giving added importance to the need for an accurate 

database. 

METHODOLOGY 

As part of our data collection effort in the report, Appropriateness of 340B 

Prices (OEI-05-02-00070), we selected a random sample of 75 plus 10 

spare 340B entities out of 4,246 using the information contained in the 

PAB database. To ensure the delivery of our data requests, we attempted 

to verify the addresses and participation of the selected entities through 

telephone calls and Internet searches. Ultimately, we requested data 

from 76 entities, accessing one of the spares. 

In addition, we interviewed nine pharmaceutical manufacturers about 

their role in the 340B Drug Discount Program. These manufacturers 

were selected, based on geographic convenience, but are all major, billiondollar corporations and comprise over 40 percent of the total prescription 

sales market. 1 During those interviews, much of the conversation focused 

on the issues that manufacturers face using the 340B database. We did 

not independently verify the nine manufacturers' reported difficulties; 

however, the comparable responses among the nine were consistent with 

our experience in attempting to use the data for our own analysis. 

Our review was conducted in accordance with the Quality Standards for 

Inspections issued by the President's Council on Integrity and Efficiency. 

OEI - 05 - 02 - 00071 DEFICIENCIES IN THE 340B D RUG DATABASE 3 
� FINDINGS 
 

Twenty-nine of the 76 sampled

Thirty-eight percent of sampled entities are entities, or 38 percent, were listed in 

incorrectly listed in the 340B database as the database as participants, but 

participating in the 340B Drug Discount reported not using the 340B discount. 

Program. These entities may have enrolled in 

the program at some point since its 

start in 1992, but reported that they no longer participate. Therefore, 

these providers are registered in the database as covered entities, but are 

not actually purchasing drugs at the 340B discount. This also indicates 

that entities are either not providing a drug benefit or purchasing their 

drugs at regular market prices. Table 1 illustrates the entities’ reported 

reasons for ineligibility. 

Table 1- Entities with Inaccurate 340B Participation Listing in the 

Database 

Number of 

Entities with 

Incorrect 

Status (29) 

Reported Reasons for Non-participation 

16 Entities reported purchasing pharmaceuticals, but 

not through the 340B Drug Discount Program 

1 Receive drugs from a larger 340B participant, but 

do not purchase drugs themselves 

12 Entities offer no pharmacy services 

Failure to fully participate in the 340B discount program reduces the 

scope of the entities’ health care services and makes inefficient use of 

HRSA grant funds. According to PAB, the database’s information on an 

entity’s address and participation status is only as good as the 

information they receive.2 PAB enters an entity’s information when it 

registers for the 340B discount, but then relies on the entity to voluntarily 

provide any changes. If the health care provider has had leadership or 

pharmacy staff turnover, it might not be aware of the benefits the 340B 

discount program offers. 

From the pharmaceutical manufacturers’ perspective, accurate 

information on an entity’s participation status in the 340B database is 

important for two reasons. First, if the entity is eligible to purchase at 

the 340B price, but is excluded from the 340B database, the 

OEI - 05 - 02 - 00071 DEFICIENCIES IN THE 340B D RUG DATABASE 4 
FINDINGS 

manufacturer risks charging that entity more than the 340B ceiling 

price. Second, sales to ineligible entities place manufacturers in a 

vulnerable position for fraud and diversion. 

During data

The 340B database had incorrect address collection for our 

information for 43 percent of sampled entities. inspection, 

Appropriateness of 

340B Prices (OEI-05-02-00070), we found that of our sample of 85 entities 

(75 plus 10 spares), 37 entities, or 43 percent, of the addresses listed in 

the 340B database were incorrect. According to interviews with 

pharmaceutical manufacturers, the database’s incorrect entity contact 

and address information hinders their ability to efficiently manage 340B 

contracts. 

The 340B database needs to have correct address information to confirm 

that only participating facilities and their patients have access to drugs 

purchased at the 340B price. While manufacturers maintain their own 

listing of their 340B contracts, they use the 340B database as the official 

source to compare and update their information each quarter. If an 

entity’s contact and address information does not match the 

manufacturer’s listing, the manufacturer has to take additional time to 

obtain accurate information. According to the manufacturers, this extra 

effort creates product delivery delays for the 340B entities. 

According to the manufacturers, because the 340B database is a 

cumulative list that does not separate those entities newly added to or 

deleted from the previous quarter, to locate new participants or detect 

deletions, they must sort through the entire list of 10,500 entities each 

quarter. 

The 340B database does not provide essential The 340B database does not 

information on entities’ billing and shipping 	 include complete entity address 

information, which is necessary arrangements. to identify the eligibility of the 

entity, as well as confirm that the address is legitimate prior to shipping 

product. 

HRSA permits entities to have arrangements with affiliated retail 

pharmacies or hospitals, as long as those arrangements are documented 

in writing to PAB. However, the complexity of the drug distribution 

OEI - 05 - 02 - 00071 DEFICIENCIES IN THE 340B D RUG DATABASE 5 
FINDINGS 

system is not reflected in the design of the 340B database and confuses 

manufacturers. 

The “entity address” field lists the address submitted on the entity’s grant 

application, but, due to the variety of drug delivery arrangements among 

340B entities, the listed address may not be where the bill is sent or 

where the product is shipped. An eligible entity may order 

pharmaceuticals, but have them shipped to a retail pharmacy that 

distributes the drugs to the entity’s patients. Alternatively, a hospital 

may order products on behalf of its affiliated entities. Frequently, the 

address listed on the Web site is actually the grantee’s administrative 

office or a post office box where bills are sent, but not products. 

HRSA allows for 340B qualified entities without on-site pharmacies to 

contract out their pharmacy services. In this arrangement, the entity is 

billed for the drugs, but the pharmacy receives the shipment and 

dispenses the prescriptions to the entity’s patients. Covered entities 

contracting with a retail pharmacy are required to supply PAB with a 

signed self-certification, documenting their agreement so drug 

manufacturers and wholesalers recognize the arrangements. However, 

the 340B database does not include a field that clearly identifies those 

entities with a contracted pharmacy arrangement. As a result, 

manufacturers have to search PAB’s separate “Contract Pharmacy” 

database to ensure that their products are both appropriately procured by 

an eligible entity and then sent to the appropriate address. Only after 

identifying the entities with contract pharmacy arrangements can the 

manufacturer return to the entity database to verify that the 

arrangement exists. 

The database also does not define or link related entities with purchasing 

associations, such as a large public hospital and its smaller satellite 

clinics, making it difficult to discern which entity is billed and which 

receives the shipment. When a hospital orders and pays for drugs, but 

has them shipped to other eligible sites, manufacturers need to be aware 

of this arrangement so they can verify that the other sites are eligible. 

OEI - 05 - 02 - 00071 DEFICIENCIES IN THE 340B D RUG DATABASE 6 
� R ECOMMENDATIONS 
 

RECOMMENDATION 

To ensure accurate and timely information on the entities' locations and 

participation status, HRSA should develop a strategic plan for managing 

the 340B program's data that: 

� revalidates all of the information currently in the 340B database 

�	 requires all participating entities to resubmit their 340B registration 

forms to PAB annually to ensure continued accuracy 

�	 creates a separate listing of entities newly added or deleted from the 

roster each quarter to facilitate the efficient transition of information 

to the manufacturers 

�	 establishes a standard format for reporting entities' addresses, which 

clearly identifies the appropriate “ship to/bill to” arrangements and 

does not include post office boxes 

�	 creates a field that designates entities with a contracted pharmacy 

arrangement 

OEI - 05 - 02 - 00071 DEFICIENCIES IN THE 340B D RUG DATABASE 7 
� AGENCY COMMENTS 
 

AGENCY COMMENTS 

HRSA’s comments on the draft report concur with all but one of the 

findings and all of the recommendations. The complete text of the 

comments is in Appendix A. HRSA also provided technical comments 

on the reports. 

HRSA has already taken action in response to two of our 

recommendations. First, HRSA is updating the Web site’s entity 

contact information and participation status in real time as opposed to 

the former, once-quarterly update. Second, HRSA linked the covered 

entities and contract pharmacy databases to clearly delineate the 

contractual relationships. We commend HRSA for its actions to 

strengthen the integrity of the database, as well as the administration 

of the 340B Drug Discount Program. 

HRSA expressed the desire to implement our recommendation to 

annually recertify entities enrolled in the discount program, but cited 

the need to first identify resources and protocol required to achieve this. 

During this consideration, we propose that HRSA consider its 

Pharmacy Support Services Contract that HRSA awarded to the 

American Pharmacists Association in September 2002 as a potential 

resource for accomplishing this task. Since HRSA also stated that it 

might be necessary to publish a Federal Register notice to announce a 

new annual certification requirement, we hope they will concurrently 

determine whether this action is necessary. 

HRSA disagreed with part of one finding that states manufacturers 

could inadvertently set a lower than intended price if they offered a 

340B discount to an excluded entity. According to HRSA, as long as the 

entity received a grant or met other eligibility criteria the manufacturer 

would not set a new best price. We agreed with this clarification and 

made the appropriate changes to the report. 

OEI - 05 - 02 - 00071 DEFICIENCIES IN THE 340B D RUG DATABASE 8 
� APPENDIX ~ A 
 

OEI - 05 - 02 - 00071 DEFICIENCIES IN THE 340B D RUG DATABASE 9
 
APPENDIX~A 

OEI - 05 - 02 - 00071 DEFICIENCIES IN THE 340B D RUG DATABASE 10
 
APPENDIX~A 

OEI - 05 - 02 - 00071 DEFICIENCIES IN THE 340B D RUG DATABASE 11
 
�APPENDIX~A ACKNOWLEDGMENTS 

This report was prepared under the direction of William C. Moran, 

Regional Inspector General for Evaluation and Inspections in the Chicago 

Regional Office, and Natalie Coen, Deputy Regional Inspector General. 

Other principal Office of Evaluation and Inspections staff who contributed 

include: 

Thomas Komaniecki, Team Leader 

Madeline Francescatti, Project Leader 

Anna Fleming, Program Analyst 

Rupal Patel, Program Analyst 

Genevieve Nowolinski, Program Specialist 

Ayana Everett, Program Specialist 

Barbara Tedesco, Mathematical Statistician 

OEI - 05 - 02 - 00071 DEFICIENCIES IN THE 340B D RUG DATABASE 12 
� END NOTES 
 

1Prescription Drug Trends-A Chartbook Update, Kaiser Family 

Foundation, November 2001 

2 OIG interview with Pharmacy Affairs Branch, June 2003 

OEI - 05 - 02 - 00071 DEFICIENCIES IN THE 340B D RUG DATABASE 13