GAO again recommends improvements to 340B program

Over the years, the non-partisan Government Accountability Office (GAO) has reviewed various aspects of the 340B program, finding areas for improvement and providing recommendations. The latest report from GAO focused on contract pharmacy arrangements, reiterating findings from previous oversight reports and revealing some new startling findings about hospitals and contract pharmacies in the 340B program. The report further highlighted the need for changes to 340B to improve program integrity and oversight.

Here are three points that stood out:

1. Chain pharmacies make up the majority (75 percent) of contract pharmacies arrangements. Even among chain pharmacies, large chains are disproportionately likely to be contract pharmacies. GAO, found that “the five biggest pharmacy chains—CVS, Walgreens, Walmart, Rite-Aid, and Kroger—represented a combined 60 percent of 340B contract pharmacies, but only 35 percent of all pharmacies nationwide.” Meaning large, for-profit retail pharmacies are generating additional revenue through a program meant to support non-profit entities providing care to needy patients.

2. Contract pharmacies are incentivized to partner with hospitals and fill prescriptions with certain types of medicines to increase revenue. GAO found that the fees paid to pharmacies varied greatly and noted that fees paid were often structured so that the contract pharmacies make more money prescribing brand medicines as compared to generics. In a recent news article about the GAO report, an economist and expert on 340B noted that this can create incentives to increase use of brand medicines, which can raise costs for patients and payers.

3. Hospitals and their contract pharmacies are not always sharing the 340B discount with low-income, uninsured patients. As noted by GAO, “Federal grantees were more likely than hospitals to provide such discounts and to provide them at all contract pharmacies.” According to the data, less than half of hospitals surveyed provide 340B discounts to low-income, uninsured patients. Of those hospitals that do provide a discount, some said they still charge patients more than the 340B discounted price that they paid to acquire the medicine.

This GAO study sheds new light on how hospitals are taking advantage of contract pharmacy arrangements to generate additional revenue through 340B without ensuring that low-income patients are benefiting from manufacturer discounts. Drug Channels also took a closer look at the study and concluded “Some of the report’s most startling revelations confirm our worst fears about how hospitals and pharmacies are abusing the 340B program.”

The study goes a step further and recommends concrete steps policymakers could take to improve oversight and accountability in 340B. This report is just the latest in a string of reports from non-partisan experts like HHS Office of the Inspector General and academic journals like the New England Journal of Medicine. Over the past decade, these reports have brought to light the shortcomings in the current 340B program and ways the program needs to be improved to ensure it actually benefits patients. As conversations about ways to fix 340B continue today on Capitol Hill, let’s hope Congress recognizes the seriousness of GAO’s findings in this study.

Read the full GAO report and learn more about ways to fix 340B at PhRMA.org/340B.