340B: The Unintentional Hospital and Pharmacy Profit Stream That Was Supposed to Help Patients, PHrma.Org.
What is 340B or Section 340B? As explained by the American Hospital Association, Section 340B of the Public Health Service Act requires pharmaceutical manufacturers participating in Medicaid to sell outpatient drugs at discounted prices to health care organizations. Those are the organizations caring for many uninsured and low-income patients. These organizations include federal grantee organizations and several types of hospitals, including critical access hospitals (CAHs), sole community hospitals (SCHs), rural referral centers (RRCs), and public and nonprofit disproportionate share hospitals (DSH). All of which serve low-income and indigent populations.
This is a story or article by organizations taking advantage of the “defined purpose and use” of a government program by going beyond discounted prices for Medicaid or low-income patients. Is the program failing vulnerable patients? Not really, this is a planned and coordinated abuse of the stated purpose of 340B.
Three ways 340B is failing vulnerable patients, Phrma.org, Nicole Longo
The 340B Drug Pricing Program is 30 years old this year, but as The New York Times recently spelled out, the program has become a profit engine for large health systems over the years instead of a program helping vulnerable, low-income patients. Aome hospitals have twisted the program to boost their bottom line.
Here are some of the ways the 340B program is failing patients:
1. 340B is reducing access to needed care.
Abuse of the 340B program is making it harder, not easier for patients in traditionally underserved areas to access care. The hospital chain at the center of the New York Times expose, “Bon Secours has been slashing services” at its facility in a poorer, predominantly Black part of Richmond. At the same time, it is “investing in the city’s wealthier, white neighborhoods.”
Additionally, 340B hospitals are gobbling up competitors in a way that consolidates health care providers. From the first quarter of 2016 through the first quarter of this year, 340B facilities were responsible for roughly 75% of hospital acquisitions, according to data collected by the Centers for Medicare and Medicaid Services. The consolidation creates powerful, large hospital systems that raise costs for patients and insurers and creating a financial barrier for patients trying to access medicines.
2. 340B is contributing to health inequities.
This program has devolved from one intended to make health care more equitable to one that drives disparities in how certain populations access care. A study published in Health Affairs found 340B hospitals were expanding into more affluent areas to generate higher profits. The study found “hospital-affiliated clinics registered for the 340B program in 2004 or later were serving wealthier communities which had higher rates of health insurance compared to communities served by hospitals and clinics registered for the program before 2004.” According to an Avalere study, these hospitals often establish outpatient satellite facilities, known as “child sites,” in different zip codes than the primary 340B hospital. Nearly half of those satellite sites are in areas where the median income is at least 30% higher than the main 340B hospital.
3. 340B is driving up health care costs nationwide.
As the New York Times explained,
“The program … allows hospitals to buy drugs from manufacturers at a discount — roughly half the average sales price. The hospitals are then allowed to charge patients’ insurers a much higher price for the same drugs.”
This ability to profit from the 340B “spread” creates incentives for hospitals to prescribe more expensive medicines and likely contributed to the pattern found in a recent Milliman analysis. On average the Milliman analysis found the cost per outpatient prescription filled at 340B hospitals was more than 150% higher than the cost of outpatient prescriptions filled at non-340B hospitals. According to Community Oncology Alliance, hospitals in the program charge commercial insurers nearly five times what they paid to acquire oncology medicines. The IQVIA’s Market Access Center of Excellence did an in-depth analysis of claims for brand medicines distributed from 340B contract pharmacies finding the vast majority of patients received “zero or close to zero” discount on the cost of their medications. In other words, patients are paying more than the cost of the medicine.
The New York Times piece focused on a single hospital in a single state, but this pattern of abuse goes much deeper and touches countless communities across the country. In terms of access, equity and cost, today’s 340B program is having the exact opposite impact of what Congress intended. PhRMA.org/340B.
A deeper dive in the particulars and solutions here: 340B-Stakeholders_September-2022.pdf (phrma.org)
The 340B Drug Pricing Program was designed to help vulnerable patients improve access to their medicines through manufacturer discounts to specific safety-net, non-profit hospitals and federally funded clinics. Unfortunately, the program has strayed far from its purpose, with more and more for-profit health care entities using these discounts for themselves. Today, it has become less about patients and more about boosting the bottom lines of hospitals, for-profit pharmacies, middlemen and more. At this point, it seems that patients are the only ones not benefiting from the billions of dollars in discounts manufacturers provide each year to fund the 340B program.