Expanding 340B Program Under Increased Scrutiny

A new study by the Berkeley Research Group (BRG) reveals that per-patient spending at 340B hospitals increased by an average of 32.4 percent, while spending at non-340B hospitals only rose 13.4 percent over the same period.

Massive increase in spending at 340B hospitals

Also, according to the study, per-patient, per-date-of-service drug spending rose by 20.6 percent for 340B hospitals in the first year of enrollment when compared to the year prior, while non-340B hospitals decreased their prescription drug spending by 4.7 percent during the same period.

“The results of this suggest a behavior change in the prescribing of physician-administered drugs after a hospital enrolls in the 340B program,” BRG said.

Institutions on the 340B program bought drugs worth more than $19 billion, an increase of 114 percent since 2014.

In addition, in March 2018, researchers at Milliman found that per-patient pharmacy expenditures at 340B hospitals exceeded spending at non-340B hospitals within the commercially insured population.

In the latest survey, BRG benchmarked changes in spending at 340B hospitals were compared to a control group of non-340B hospitals. The report surveyed 379 Disproportionate Share Hospitals (DSH) hospitals in the 340B program between January 2009 and January 2016, with a total of 1.9 million patients involved, Healthcare Dive reported.

Expansion fuels 340B controversy

The latest results are likely to add fuel to an already raging fire between hospitals and drug makers over the 340B drug program, which sets a limit for the amount manufacturers can charge institutions participating in the 340B program for drugs.

The 340B program was created in 1992 and mandates drug manufacturers to provide outpatient drugs to eligible health care organizations and covered entities at significantly reduced prices.

The survey was funded by drugmaker lobby group Pharmaceutical Research and Manufacturers of America (PhRMA).

With the 340B program expanding at such a rate, drugmakers are increasingly scrutinizing the plan. The concern among drug makers is that 340B hospitals are prescribing more to maximize their profits under the program. This anxiety has not been alleviated by a Department of Health and Human Services rule that came into effect at the beginning of the year instituting a ceiling price that limits how much drug manufacturers can charge hospitals in the 340B program.

Drugmakers and some government agencies are also worried that the 340B Drug Discount Program may have a negative impact on the pharmaceuticals market.

“This impact is in part due to the program’s increasing size relative to the overall pharmaceutical market. Since 2010, the program has expanded at an average annual growth rate of 21 percent and has grown by 114 percent in the last three years alone. In May 2018, the Health Resources and Services Administration (HRSA) reported that in 2017, 340B covered entities purchased more than $19 billion in drugs at the 340B price,” BRG reported in July 2018.

The backdrop of the latest study is that in June 2015, the Government Accountability Office (GAO) observed that per-beneficiary spending at 340B Disproportionate Share Hospitals (DSH) exceeded spending at non-340B hospitals by a wide margin.

“In summarizing its findings, GAO noted that the difference between Medicare reimbursement and the 340B acquisition cost creates a ‘… financial incentive at hospitals participating in the 340B program to prescribe more drugs or more expensive drugs to Medicare beneficiaries.’ GAO noted that this incentive could have negative financial implications for Medicare and its beneficiaries,” BRG reported.

The BRG survey sought to build on the GAO and Milliman findings on whether hospitals that enroll in the 340B program exhibit increases in drug spending per beneficiary after enrolling.

Adding further intrigue to the debate on the 340B program is that the Trump administration announced plans in November 2107 to scale back how much-participating organizations could benefit from the program, by reducing the rates at which Medicare would compensate hospitals and clinics for the cost of 340B drugs.  A 28 percent decrease in reimbursement rates went into effect in January 2018.

340B supporters say its an essential program

However, advocates of the 340B program, such as the American Hospital Association (AHA), say it has benefits because hospitals use the 340B savings to provide free care for uninsured patients, offer free vaccines, provide services in mental health clinics, and implement medication management programs and community health programs.

The AHA said it believed the 340B program “is essential to helping safety-net providers stretch limited resources to better serve their communities.” The AHA described the 340B program as a “small program with big benefits.” It said the 340B program accounts “for only 2.8 percent of the $457 billion in annual drug purchases made in the U.S.”

The AHA also dispelled notions that growth in the 340B program was out of control and instead insisted that the drugs used by hospitals on the program accounted “for only a small fraction of drugs sold through the 340B program.” The AHA attributed the expansion of the program to other factors such as the increased volume of outpatient care and the increased use of specialty drugs.

Stat News described the 340B program as a “well-intentioned drug discount program gone awry.”