ICYMI - Analysis finds higher outpatient drug spending at 340B hospitals

Did you know 340B hospitals prescribe more medicines or more expensive medicines? A recent analysis by Milliman, commissioned by PhRMA, found hospitals participating in the 340B drug pricing program have higher per patient outpatient pharmacy costs for their commercially-insured patients than their non-340B counterparts. As part of their analysis, the authors determined that differences in the overall health of patients do not explain these cost differences.

In 2015, the Government Accountability Office (GAO) conducted a similar analysis of outpatient pharmacy costs for Medicare Part B and found that “there is a financial incentive at hospitals participating in the 340B program to prescribe more drugs or more expensive drugs to Medicare beneficiaries.” Milliman used commercial market data and found similar patterns in the per-patient hospital outpatient pharmacy spending to those the GAO highlighted in Medicare Part B. The Milliman study found average per patient outpatient drug spending for commercially insured patients at 340B DSH hospitals is nearly three times the spending at non-340B DSH hospitals ($457 and $159, respectively). 

Higher priced medicines and increased prescribing tendencies are ultimately paid by insurers and beneficiaries, who pay cost sharing and premiums. Consequently, the 340B program may be contributing to higher health care costs for everyone with private insurance through higher premiums and, for a smaller subset of patients, through higher out-of-pocket costs.

These dynamics were part of a broader discussion on Capitol Hill during two recent Senate Committee on Health, Education, Labor and Pensions hearings focused on the 340B program. During one, Senator Bill Cassidy (R-LA) highlighted the numerous independent studies that have concluded the 340B program is no longer working as intended. In case you missed it, here are some quotes from the hearings:

• Senator Patty Murray (D-WA): “Of course, for us to ensure this program does good, we have to ask whether it is implemented well and we have to ask whether we can make it better. … We can and should provide accountability in a way that strengthens and preserves this program.”

• Senator Lamar Alexander (R-TN): “We also know there are instances where 340B hospitals and clinics may not be using the savings directly to help low income patients afford their medications or provide care. There’s no limit in the statute that says what hospitals may or may not spend the money on.”

• Lori M. Reilly, executive vice president for policy, research and membership, PhRMA: “While growth of the program alone may not be concerning, it becomes alarming when you couple it with a growing body of evidence that demonstrates this program has become a market distorting program that is raising costs for patients in the entire health care system including the government.”

• Ann Maxwell, assistant inspector general for evaluation and inspections, Office of the Inspector General: “Greater transparency in prices and claims, along with clear program rules will ensure that the full benefits of the program support low income patients who depend on their safety net. … It has been a fundamental issue of the 340B program almost since its inception, this lack of transparency. It’s a significant issue.”

• Debra A. Draper, director, health care team, U.S. Government Accountability Office: “[A] number of important issues remain, including whether the intent of the program, which was established 25 years ago, is still relevant today given the vastly changed healthcare landscape and 340B program environment, and continued lack of specificity and program guidance, most notably the definition of a patient and hospital eligibility criteria. Until these issues are resolved, there will continue to be questions about the integrity of the 340B program and HRSA's ability to provide effective oversight.”

The Senate continues to evaluate 340B and whether it is working for patients with a third hearing scheduled for tomorrow, June 19, with Capt. Krista M. Pedley of HRSA. Tune in here at 10am on Tuesday: Hearing Livestream.

To learn more about 340B, visit PhRMA.org/340B.