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Effects of the 340B Program

By November 12, 2014Commentary

The federal 340B program was established to allow registered 340B entities to get mandated discounts on drugs prescribed for low-income and uninsured patients.  Because of loose regulatory language, the program appears to have expanded far beyond this original intent and a review is underway to potentially make changes to the program.  A pair of studies reported in Health Affairs analyzed use and dispensing patterns for 340B pharmacies.   (HA Article 1)  (HA Article 2)   The first study looked at what hospitals have done with the program.  From 2001 to 2011 the number of 340B sites doubled to 16,500 locations.  A primary criticism is that much of this expansion is driven by hospitals seeking to make profits by prescribing drugs priced under the 340B program to patients with private insurance or Medicare coverage, but not passing the discounted price the hospital pays on to the patients or third-party payer.  For 2012, one health system, the Duke University Hospital, made $282 million over five years.  The authors looked at whether the newer 340B sites were still serving the intended populations.  In 2012 there were 960 340B hospitals who were also in the disproportionate share program and 3964 outpatient clinics affiliated with those hospitals.  Both the number of hospitals and outpatient clinics has grown rapidly in the last ten years.  The new DSH hospitals coming into the program are servicing fewer low income communities.  This suggests that hospitals are joining the program and establishing outpatient clinics with the intent of creating profit opportunities by serving more insured patients with 340B drugs.

The second study looked at 340B contract pharmacy dispensing patterns.  The 340B program allows participating medical providers which do not have an in-house pharmacy to contract with outside pharmacies to be able to participate in the program.  Coupled with the results of the study above, you can see the profit opportunity now extends beyond the actual 340B entity to the contract providers, who include large retail chains like CVS and Walgreens.  The number of 340B entities with at least one contract pharmacy has risen to 4719 and one out of 4 US retail pharmacies is now a 340B contracted pharmacy.  Big business.  The study looked at prescriptions dispensed by Walgreens under the contracted pharmacy program.  The most notable finding in the analysis is that the 340B prescriptions are only 54% for generics, while 82% of all Walgreens prescriptions are generics.  Given the significantly lower cost of generics, this is greatly adding to drug spending.  While some of the difference is accounted for by different categories of drug use in 340B, most of it isn’t. Many of the 340B prescriptions did appear to be for otherwise uninsured or low-income patients and for serious disease like HIV or tuberculosis.  But it is also apparent that the program is being run in a way that results in excessive spending on drugs, often for patients who weren’t even intended to be covered by the program.


Join the discussion 11 Comments

  • Wes C. Addle says:

    It is interesting how you neglect to include in your article that in fiscal year 2012, Duke University Health System had $291 million in total community benefit and investment, more than $100 million of which was UNCOMPENSATED CARE! So now that you are actually educated about them, do you still believe that they earned a profit? It appears that using simple math, the $282 million that you call profit during a five-year period was more than spent, by hundreds of millions, but how you would know that by only reporting a part of the story?
    If you are going to write an article, perhaps you should do your research and not provide just half of the story. This is horribly shoddy journalism with no credibility whatsoever. Shame on you for trying to appeal to your like-minded constituents and to puppets of the pharmaceutical industry. You can read about all of the charitable work that Duke University Health System has provided, especially reviewing page 10, here:
    If you are going to take the time to write about a topic, perhaps you should include all of the pertinent and viable information, and not exclude large portions of the entire story, if you want to be viewed as a credible writer. Ridiculous.

    • Kevin Roche says:

      I appreciate you reading the blog. In regard to Duke, I merely reiterated what was reported in Health Affairs, certainly a reputable journal. I did not say Duke was a bad institution or did not do good things. As you appear to recognize it is true that they are making a very large sum of money on the 340B program. The 340B program is a good program as originally intended, it was supposed to provide very low cost drugs to low-income and the uninsured. The statistics are irrefutable that the program, due to well-intended but flawed regulatory interpretation, has increasingly been used to provide the drugs to insured patients, without the hospitals passing the discounted price on to the patient and the third-party payer. That is simply wrong and raises health spending and premiums. The fact that an institution may do some good things does not excuse the bad things it does, any more than a thief giving money to charity would excuse the crime of stealing. It would appear that you either have some connection with Duke, another 340B hospital or a 340B pharmacy and you should be transparent in disclosing facts and affiliations that might be relevant to the views you are expressing.

  • Bob says:

    As far as Duke goes, buying an aspirin for $1, charging $100, collecting $20 then bemoaning the $80 as uncompensated care is ridiculous!

  • Bill Nulman says:

    Again, aspirin is an over-the counter item and is not pertinent. Do you have any knowledge of prescription processing? Perhaps you should only write about subjects in which you have a minimum of understanding, rather than simply regurgitating Sally Pipes’ article.

  • Bob says:

    Substitute whatever Part B drug you want for the aspirin – the drastically overly inflated uncompensated care figures still apply. One of the key findings from the OIG report on 340B in Feb 2014 was that 340B entities provided LESS uncompensated care to uninsured patients than entities with 340B. That truly shows the greed and abuse around 340B. I guess you’ll now say the OIG doesn’t know what they’re talking about. Here’s a link to the OIG report.

    • Wes C. Addle says:

      The OIG report is a powerless opinion and they have no authority to overturn a law that was enacted by Congress and signed by President Bush in 1992. As taxpayers, you and I contribute nothing to this program that helps millions of people throughout the country. How many other programs of this nature, for this population, can you name that are not partially or completely funded by taxpayer dollars? Why are you so against a program that helps less fortunate people? How is this directly affecting you?

  • Bob says:

    I think the OIG report shows that 340b is not helping the less fortunate. I’m not sure it’s helping any patients. Let’s break it down:
    1. For uninsured patients, most manufacturers of brand drugs provide free drugs to these patients (and 340B entities utilize this).
    2. For Medicaid patients – 340b can’t be helping them since the savings are passed along to Medicaid.
    3. For Medicare patients the 340b entities can’t systematically write off patient financial responsibilities so they’re still on the hook for their $.
    4. For Commercially insured patients, most brand drug manufacturers have a copay card available to help with the patient financial responsibility so no 340b $ is going there (and 340b entities use these as well).

    I welcome some legit example of how it really does help patients.

    How does it impact me? The same way it’s impacting everyone in our healthcare system by contributing to skyrocketing costs:
    A. I think it’s quite clear that by forcing drug mfgs to give a huge discount to a rapidly growing portion of their market it’s resulting in them raising their prices and/or inflate the prices of new drugs before they hit the market.
    B. By driving more and more business to the hospital setting where reimbursement is much, much higher than in the private practice setting. As I recall, when UPMC MedOncs shifted to 340b/hospital based it immediately started costing the primary insurer in the area over $100m more per year.
    C. It’s a massive case of cost shifting. There are probably many hospitals that need the $ but due to distortions like this we may never understand the true costs and figure out what is needed to keep our healthcare system from going broke.
    It’s been my experience the hospitals that have 340b use it like a war chest and use the 35mile radius to milk it for all it’s worth and use the spoils to go on buying sprees acquiring other hospitals and employing the physicians which continues to feed and grow the 340B war machine.

    • Wes C. Addle says:

      I appreciate your further words and agree with many of the points that you have made, but not all. Why do you not go after pharmaceutical companies for raising and inflating their prices to make up for the 340B discounts that they must provide, instead of the hospitals servicing patients? Pharma spends millions of dollars annually on their lobbying efforts, so perhaps that is what is driving the cost of medication. Multiple reports have been published illustrating that the 340B program represents 2% of what pharmaceutical companies sell annually, and lobbying efforts represent between 5% – 10%. That being said, go after them for choosing to drive up the prices for their shareholders, and not the hospitals or any other external reason.

      I have absolutely no connection in any way to Duke University, Duke University Medical Center, or other safety-net 340B-eligible hospital or any registered 340B contract pharmacy.

      I simply know what the program can do and is doing to help people throughout the country, particularly in low-income rural areas in many states, as I have extensively researched this topic for years.

      Please read –

    • Kevin Roche says:

      Appreciate your response. I think if you read through a number of the blog posts you will see that I do comment on reports which relate to drug manufacturer pricing of both brand-name drugs and specialty drugs. There are many, many instances where that pricing is excessive based on the value that the drug is delivering either in general or in relation to existing treatments. I am not opposed to companies making a reasonable profit even in health care, but there are many instances where pricing and resulting margins are not justifiable, in my opinion.

    • Wes C. Addle says:

      Funny. Really good article that I enjoyed reading. Interesting perspective on how the tax-break dollars are being spent in local communities, if they are. Thanks.

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