The 340B program is interfering with the U.S. biosimilars market and impacting patient costs

Research has shown that 340B hospitals are more likely to prescribe more expensive medicines and significantly mark up the price of medicines. For example, 340B hospitals received nearly five times what they paid, on average, to acquire oncology medicines through 340B. These practices have implications for what patients pay out of pocket — and new research adds to the evidence. A new Milliman analysis found 340B hospitals have lower utilization of biosimilars than non-340B hospitals among their commercially insured patients, potentially leading to higher out-of-pocket costs for some patients.

Over the last decade, the biosimilars market has matured and become increasingly robust, and as Milliman notes in their analysis, the rate of biosimilars adoption is increasing. As of August 2022, there are 22 biosimilars on the market in the United States competing against nine brand biologics, also referred to as reference products. In addition, the Food and Drug Administration (FDA) reported that as of March 2022 there are approximately 100 biosimilars enrolled in FDA's program to expedite review of biosimilar development. This evolution of the U.S. biosimilar market is resulting in more and more competition, which is key to generating savings for patients.

However, evidence suggests the 340B program may be interfering with this robust competition and distorting the market in the process. Hospitals participating in the 340B program are able to collect greater profit from the sale of products with higher prices, collecting the spread between the price they are reimbursed at and the discounted 340B price they paid. Biosimilars generally enter the market with lower list prices compared to their reference products, resulting in less potential profit for 340B hospitals. This may contribute to the lower biosimilar utilization observed by Milliman at 340B hospitals compared to non-340B hospitals over the study period.

What does this mean for patients? Milliman found that among commercially insured patients who paid cost sharing, those who received biosimilar products had 16% lower out-of-pocket costs compared to patients who received the reference product at 340B hospitals in 2020. Meaning, if 340B hospitals had biosimilar utilization rates that were in line with non-340B hospitals, then patient costs at 340B hospitals would generally have been lower.

It is alarming that the potential for more revenue could be undermining the competitive market that lowers costs for patients.

With 57% of U.S. hospitals now participating in 340B, policymakers need to address the perverse incentives in the 340B program that undermine the successful evolution of the biosimilar market and expose patients to higher out-of-pocket costs.  

Learn more about the 340B program here and read the full Milliman analysis here.