The 340B drug discount program has been a source of controversy, with the pharmaceutical industry claiming that it’s one of the main drivers of rising healthcare spending. But a study from the Medicare Payment Advisory Commission challenges that assertion, finding that its effect on cost sharing for patients is minimal.
For hospitals participating in 340B, spending on cancer drugs was 2 to 5% higher than that of non-participants, and 1 to 7% higher than physician offices. That translates into a modest effect on healthcare consumers.
The evidence is limited, though, and ultimately inconclusive. The spike in costs couldn’t be definitively linked to the 340B discounts, and could well be due to other factors. One such factor: the tendency among participating facilities to be large teaching hospitals that care for more young and disabled patients. These patients often receive subsidies in Medicare’s prescription drug benefit and require more robust treatment.
WHAT’S THE IMPACT
The 340B program is a mechanism for safety net hospitals to ease their financial pressures by requiring drug manufacturers to provide discounts on certain outpatient drugs sold to qualifying hospitals and clinics.
The MedPAC analysis compared average monthly spending on cancer drugs between participating and non-participating hospitals and physician offices, focusing primarily on breast, colorectal, prostate and lung cancer as well as leukemia and lymphoma.
When it comes to higher spending, the type of cancer matters: The 340B program was linked to higher spending only for prostate and lung cancer, though broad increases in oncology spending in recent years have also played a part in the ballooning cancer spend. Average drug spending was $ 1,800 per month for prostate cancer, and $ 5,200 for leukemia and lymphoma.
Lung cancer commands a higher price per unit for Part B drugs under 340B, with a larger share of patients receiving new immuno-oncology therapies. Prostate cancer saw a higher price per unit for both Part B and Part D drugs, and saw more Part D prescriptions per patient — 8.1, compared to 7.5 among non 340B participants. But these findings could not be attributed to incentives created by 340B discounts.
THE LARGER TREND
The 340B drug discount program resulted in savings for hospitals last year, averaging out to $ 11.8 million per facility, according to a 2019 survey from 340B Health. 340B Health is a trade group that represents more than 1,000 public and private nonprofit hospitals and health systems that participate in the 340B drug pricing program.
While the average annual 340B savings across all hospitals was $ 11.8 million, savings ranged wildly across different facilities based primarily on their size. And hospitals reported an average of $ 100,000-200,000 in 340B compliance costs, and an average of two full-time employees overseeing and maintaining a 340B program.
Eighty-two percent of hospitals said cutting or losing their 340B savings would hurt their ability to provide more patient care services, while two-thirds said it would reduce their ability to provide uncompensated care. Seventy-one percent of DSH hospitals said a loss in savings would reduce their ability to provide free and/or discounted drugs.
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