Corruption of 340B Discount Drug Programs
Section 340B of the Public Health Service Act requires manufacturers to sell drugs at a discounted rate to selected health system purchasers. Selected hospitals, health centers and disease-specific programs that participate in the 340B program acquire drugs from manufacturers at lower prices and deliver treatment with minimal cost to the patient. If an uninsured patient is hospitalized, they will receive outpatient prescription drugs from safety-net providers and 340B-eligible “covered entities” regardless of their ability to pay for the treatment. With 37 million people living in poverty and 28 million living without insurance in the US, the 340B program was intended to expand access to care.
There are at least 35,000 covered entities and drug purchases at 340B prices totaled $38 billion in 2020. This equates to $42 billion in savings for 340B-eligible purchasers. But drugs purchased under 340B are not exclusively for uninsured patients. When 340B drugs are dispensed to patients that do have insurance, covered entities can bill these insurers at the non-discounted drug price. By law, 340B purchasers cannot bill Medicaid more than what they paid for the discounted drug. Yet, they can bill Medicare and commercial insurers to obtain reimbursement amounts significantly higher than the discounted 340B price. The 340B discount drug program has become a significant source of income for covered entities.
The “spread” between the 340B price and the third-party insurer reimbursement encourages providers to choose a higher-cost agent, because the profit margin will be higher. Although hospital cost acquisition data is not available, there is an estimated 25–55% gap between the cost for a 340B drug and Medicare Part B reimbursement. Some of this profit may be redistributed back into the health system to expand services for uninsured patients. More commonly, this money is swallowed up by intermediaries like pharmacy benefit managers (PBMs) and third-party administrators.
References
McCaughan M. The 340B Drug Discount Program. Health Affairs. Published Sep 14 2017. https://www.healthaffairs.org/do/10.1377/hpb20171024.663441/full/
King R. Appeals court upholds nearly 30% payment cut to 340B hospitals. Fierce Healthcare. Published Jul 31 2020. https://www.fiercehealthcare.com/hospitals/appeals-court-upholds-nearly-30-payment-cut-to-340b-hospitals
Tribble SJ, Featherston E. As Big Pharma and Hospitals Battle Over Drug Discounts, Patients Miss Out on Millions in Benefits. Kaiser Family Foundation. Published Nov 16 2021. https://khn.org/news/article/340b-big-pharma-hospitals-battle-over-drug-discounts-patients-miss-out-on-millions-in-benefits/
Longo N. Fact Check Friday: The truth about the cost of 340B to patients. PhRMA. Published Jan 26 2018. https://catalyst.phrma.org/fact-check-friday-the-truth-about-the-cost-of-340b-to-patients
ongo N. New Pieces of Legislation Continue Momentum to Fix 340B Program. PhRMA. Published Jan 18 2018. https://catalyst.phrma.org/340b-spotlight-new-pieces-of-legislation-continue-momentum-to-fix-340b-program
