The 340B drug discount program continues to come under criticism, even as a new study finds participating hospitals treat higher numbers of low-income patients.


May 8—A new study found that 340B disproportionate share hospitals treat higher percentages of low-income oncology drug patients compared with non-340 B hospitals.

The analysis, which was conducted by Dobson DaVanzo & Associates using 2013-14 Medicare claims data, found that 22.8 percent of oncology drug patients at 340B hospitals were dually eligible for Medicare and Medicaid, compared with 13.8 percent at non-340B hospitals.

Sherrie Dixon-Williams, MD, MHS, a pulmonary and critical care specialist and past medical staff president for the MetroHealth System in Cleveland, said the new study “sheds light on some of the positive aspects of the program” and validates that “it is doing what it was intended to do: help hospitals stretch scarce resources and provide care to low-income individuals who are either underinsured or uninsured.”

“Hopefully, this study will provide some balance to what is becoming a very hot topic,” Williams added in an interview.

As a condition of participation in Medicare and Medicaid, Congress requires drugmakers to offer discounts on certain outpatient drugs to hospitals and other public and private not-for-profit providers that qualify for 340B participation by treating large numbers of poor, uninsured, and underinsured patients. In 2010 Congress expanded 340B eligibility to the nation’s 1,300 critical access hospitals (CAHs), and now nearly 45 percent of U.S. hospitals are eligible. A 2015 study by the Medicare Payment Advisory Commission (MedPAC) estimated that the average discount on outpatient drugs is 22.5 percent.

As the program has expanded, it has drawn criticism from federal regulators, including the Health Resources and Services Administration (HRSA), which oversees it, and MedPAC.

The Pharmaceutical Research and Manufacturers of America (PhRMA) and the Alliance for Integrity and Reform of 340B (AIR 340B) also have urged reform and corrective legislation. PhRMA and other critics blame 340B for rising healthcare costs, citing abuses of discounts.

“Years of unchecked growth, combined with a lack of oversight, have resulted in unsustainable expansion in a 340B program that is no longer benefiting the vulnerable or uninsured patients it was created to help,” AIR 340B spokeswoman Stephanie Silverman said via email.

AIR 340B said the program has more than doubled in size, with 340B drug sales growing from $5.9 billion in 2010 to an estimated $16 billion in 2016 and projected to reach $23 billion by 2021.

Silverman said that at AIR 340B’s National Leadership Summit, which took place May 2 in Washington, D.C., U.S. Rep. Chris Collins (R-N.Y.) announced plans to introduce legislation to address those issues and others “that have steered the 340B program away from meeting its intended purpose.”

She said reform is needed to clarify the definition of a 340B patient for hospitals and to tie hospital eligibility to safety-net status.

“Stronger standards are also needed for outpatient clinics purchased by hospitals, now often located in much wealthier areas than the 340B hospitals themselves,” she said.

The Provider Viewpoint

Safety-net hospital leaders and their associations disputed the attacks.

In 2015, for example, MetroHealth generated $41.6 million in 340B drug savings to support other patient programs, Dixon-Williams said.

“As Congress debates the new health law and how to deal with preexisting conditions, we are treating many of those patients with drug addictions and untreated mental health conditions,” Dixon-Williams said. “We offer smoking cessation classes and materials for free. Our institution is investing our 340B savings in treatments for heroin overdoses in the community and care-transition efforts to provide navigators, coaches, and others to help patients stay out of the hospital.”

Erin O’Malley, director of policy for America’s Essential Hospitals (AEH), said the 340B program is vital to AEH member-hospitals.

“It offers a critical lifeline for all of our members,” O’Malley said in an interview.

O’Malley said possible legislation to tighten 340B eligibility restrictions could mean serving fewer patients.

Accessing the 340B program allows eligible hospitals to combat the rising cost of drugs for low-income patients, O’Malley said. And because of those discounts, hospitals can address other aspects of health care that are not reimbursed, such as transportation and translation services,

“Congress designed this program to allow hospitals to stretch their federal resources, and we feel comfortable that our members are comfortably aligned with the law’s original intent,” she said. “We have always supported improvements to the program that would drive program integrity.”

AEH supports a HRSA initiative to develop a secure website that would promote price transparency, allowing hospitals to purchase drugs at the best price.

Maureen Testoni, senior vice president and general counsel for 340B Health, an association of 340B providers, said the group is “very concerned” about opposition from pharmaceutical trade groups.

“The way they portray our hospitals doesn’t seem accurate,” Testoni said of recent statements from the AIR 340B summit.

Testoni conceded in an interview that the program is growing, but noted, “340B hospitals spent $12 billion on 340B drugs in 2015. That’s only 2.6 percent of the $457 billion total spent on drugs in the U.S. The discount on those drugs is $6 billion. That $6 billion may not be a significant percentage of total drug spending, but it is very significant for hospitals serving low-income and rural patients.”  

A 2013 study by Pew Charitable Trusts found drugmakers spent $27 billion on sales and marketing in the U.S. alone.

Testoni said research and data confirm that 340B hospitals are doing more than non-340B hospitals to treat low-income uninsured and underinsured patients,

“Five years ago, we didn’t have complete data to support that,” she said. “But new research validates that benefit. The most recent numbers have shown that Medicaid and low-income Medicare patients represented 45.5 percent of 340B DSH hospitals’ patient case load versus just 26 percent for non-340B hospitals. 

“And while these 340B hospitals account for 36 percent of Medicare acute care hospitals, they provide 60 percent of all uncompensated care.”

Putting 340B Discounts to Use

Samuel Ross, MD, the CEO of Bon Secours Baltimore Health System and executive vice president of Bon Secours Health System, said 340B savings support an outpatient specialty care clinic and patient transport services.

“Any savings we can get, we reinvest to provide support for patients with these kinds of needs,” Ross said in an interview.  

Cynthia Martens, director of pharmacy for Monroe County (Ala.) Hospital, said the poverty rate in the market is 34 percent and the hospital’s case mix is 46 percent Medicare or Medicaid, with unemployment topping 12 percent.

“There are some very poor people living here, and we see many patients who are uninsured or underinsured,” Martens said in an interview.

“We wouldn’t be here without the 340B program. Our emergency department loses money. We’re one of the only rural hospitals here still offering obstetric services. We have 50 oncology patients, some of whom drive 50 miles or more for their medicine. The money saved from 340B subsidizes other programs and services we offer, including diabetes self-management programs for 70 patients per month. Without it, we would have to close our obstetrics and oncology programs and maybe even the ED.”


Mark Taylor is a freelance writer based in Chicago.

Publication Date: Tuesday, May 09, 2017