The Minnesota 340B Report Is Out

Explanation: The 340B Drug Pricing Program was designed to help patients access more affordable medicines. Since 1992 manufacturers have provided billions of dollars in steep discounts on outpatient medicines to safety-net clinics and qualifying hospitals expecting that those entities would use the savings to ensure vulnerable patients have access to needed medicines.

But the 340B program has strayed far from its safety net purpose. 340B | PhRMA Report.

46Brooklyn had a mention (The Drug Pricing Feast) up about Cost Curve and Brian Reid’s coverage of the long-anticipated release of the Minnesota Department of Health report on the ins and outs of the 340B program. 46Brooklyn recommend reading Brian Reid’s take on the report over his site . . .Cost Curve.

Special Edition: The Minnesota 340B Report Is Out, Brian Reid @ Cost Curve

Brian: The data has some gaps — as the state (Minnesota) recognizes — but it’s still a fantastic resource for seeing how the program operates at a more granular level.

I was working through the full newsletter this morning when I saw that the Minnesota 340B report dropped. So I think it’s worth a special edition today. That doesn’t mean there’s no other news. You’ll either get that later today as a rare Cost Curve twofer or tomorrow as a double edition. 

For the record, the other big thing to highlight is the Sanofi 340B move (the WSJ exclusive is here) and the FDA commissioner nomination, about which I don’t have a lot to say. There are a lot of smaller, but still fascinating, other bits to pick up, too. No slow roll into Thanksgiving, I guess. 

. . .

The Minnesota state report on 340B is now public. It’s indeed a milestone, and it ought to be a guide to how the program is approached going forward. My snap reading of the report is below, and I’m sure I’ll be back with corrections, clarifications, and alternative viewpoints as I — as well as the other 42 or 43 people who care deeply about 340B — sift through this.

The caveats belong up front. Because of the way that the Minnesota statute was written, there’s a lot of reporting that did not happen. Notably, data on office-administered drugs — think oncology meds — weren’t included in what providers passed along. 

That oversight was corrected in legislation passed this year, but it leaves a gap in the first tranche of numbers: as much as 80% of 340B dollars are associated with medicines given in the office (as opposed to at the pharmacy). 

So the topline number, $630 million in profits, is a “substantial underestimate.” That’s not my take. That’s how the state characterized the findings. 

Stating the obvious, $630 million is still a lot of money. And it’s instructive to understand how the state arrived at the $630 million number. 

Minnesota providers spent $734 million to buy meds at 340B prices. Another $120 million went to “external operating expenses” (more on that in a moment). And the providers received $1.5 billion in reimbursement. 

For those who like to see the math: $1.5B – ($734M + $120M) = $630M in net profit. 

Here’s how the report visualizes things: 

In terms of reactions, the Minneapolis Star-Tribune included comments from the Minnesota Hospital Association and PhRMA, along with perspective from 340B expert Sayeh Nikpay, from the University of Minnesota.

Lots of other nuggets to digest:

• The $120 million in “external operating expenses” is what was siphoned off by contract pharmacies and third-party administrators, most of which are for-profit entities, many of which are owned by PBMs or private-equity firms. In other words, $16 of every $100 in 340B profit didn’t help patients or the providers. It got sucked up by middlemen. That’s a problem. 

• The math here is elegant: the average markup was apparently close to exactly 100%: buy for $734 million, sell for $1.5 billion. That masks substantial variation, and it’s unfortunate that we don’t see the office-administered drugs (where we know the markups are even more outrageous). But it creates a helpful rule of thumb. 

• The report breaks down 340B profits on a drug-by-drug basis, which is illuminating. Every Humira scrip nets covered entities $3,400. Each insulin script brings in $400. Eliquis? $558. 

• It also shows 340B profits on a provider-by-provider basis, which is going to allow for some worthwhile calculations to be made, and — quite possibly — some great journalism to be performed. For instance, no hospital made more money from 340B than M Health Fairview University of Minnesota Medical Center ($129 million). That’s noteworthy, because, per the Pioneer Institute’s analysis of charity care, the University of Minnesota Medical Center spent 0.5% of its operating revenue on charity care in 2022. (The U.S. average was about 2.3%.) Should that raise questions about how that $129 million was spent? 

• Not everyone profits in the same way. Indeed, not everyone profits, period. Sure, U of M made more than $100 million in profits. But a handful of safety-net federal grantees showed a loss on 340B, meaning that they bought medicines but never got reimbursed. In other words: real charity care. That raises questions, too: is the system truly set up to support those who need the support the most? 

This is only the start of the analysis. I can’t wait to how others look at and use the data. And I really can’t wait for next November, when we’ll presumably have a fuller look at actual 340B spending  and some longitudinal data.

The drug pricing feast: Who’s getting their fill this month? 46brooklyn Research