More Evidence of 340B Program Issues

By October 27, 2017 Commentary

The 340B program was supposed to be a way for hospitals to get lower-cost drugs which they would then pass on to poor patients.  It has evolved far beyond that and is frequently criticized, including now by the drug companies, who are concerned it is diverting sales from more profitable channels.  A paper from the Berkeley Research Group, funded by the pharmaceutical manufacturers, examines how a shift in services supported by 340B is increasing health spending.    (BRG Paper)   The paper builds on earlier work released in June of this year showing that 340B sales were about 7.7% of outpatient brand drug sales.  In that study, as much as 30% of Medicare Part B reimbursement for breast cancer, arthritis and multiple myeloma drugs was at 340B hospitals.  In the current paper, they focus on how 340B appears to be shifting sites of care and increasing costs.  Data was used from 2008 to 2015.  The crux of the problem is that when hospitals buy previously independent physician practices, the offices that those doctors are in magically become hospital outpatient departments, therefore being eligible for 340B treatment and also getting higher reimbursement.  MedPAC and others have been pushing for years to equalize outpatient reimbursement and stop giving a windfall to hospitals.  The 340B issue just exacerbates this already existing source of cost escalation.

The researchers’ analysis revealed that for the top ten drugs for each of the studied conditions, site of care has moved significantly from the physician office to “hospital outpatient departments”.  For example, breast cancer treatment declined from 72.6% in doctor offices in 2008 to 49.4% in 2015.  This raises spending both on the drugs and on the physician services related to administration of those drugs.  Some limited attempts to reform these practices in regard to Medicare began earlier this year, but that does nothing to help Medicaid and commercial payers, and Medicare is still paying too much.  Now it is hard to have any sympathy for the drug manufacturers, particularly given their continued irresponsible pricing behaviors, but that doesn’t detract from the legitimacy of their complaints regarding the 340B program.   Hospitals are also frequently bad actors in regard to health spending, and their abuse of the 340B program is an example of that.  They have used it to generate profits, not help low-income patients.  The program is the subject of intense lobbying, which has delayed needed changes to return the program to its original limited intent.  Hopefully Congress or HHS moves ahead now with long-proposed legislative and/or regulatory solutions.

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