Early 340B hospitals gave more uncompensated care than later participants
- Hospitals that joined the 340B Drug Pricing Program at its onset provided more uncompensated care and low-profit services to patients than those who joined in its later years, according to a new research letter published in JAMA from researchers at Vanderbilt University and the University of Chicago.
- The research comes as Congress and President Donald Trump have turned attention to the program, calling into question whether it has outgrown its intent.
- Allan Coukell and Sean Dickson, drug pricing experts at the Pew Charitable Trusts, write in JAMA that policymakers would be "well served by greater transparency on hospitals' use of 340B revenues," but warn that reductions in 340B eligibility will lead to a transfer from Medicare spending on 340B hospitals to increased revenue for drug manufacturers.
The research letter echos findings that the 340B program has quickly grown since its founding in 1992. Before 2004, fewer than 200 hospitals took part, but between 2004 and 2010, the program grew to 927 hospitals. By 2015, the number of participating hospitals reached 1046, or 41.8% of non-profit and public general acute care hospitals.
In 2015, 340B hospitals accounted for 60% of all U.S. hospital outpatient drug spending, totaling $14 billion, according to the research letter. Coukell and Dickson calculate that in 2015, 340B discounts totaled $6 billion on $12 billion in sales, a net reduction of about 1.9% in total manufacturer revenue. In 2016, covered entities made more than $16 billion in purchases, according to Trump's drug pricing blueprint.
The researchers found that early participants in the program tended to be larger, disproportionally public, academic and located in counties with lower income levels and higher uninsured populations, when compared with those that joined after 2004.
"Although participating hospitals provided more uncompensated care and low-profit services to patients despite worse finances than nonparticipants, later participants — most hospitals — spent less of their budget on uncompensated care and were more financially stable compared with earlier participants," researchers Sayeh Nikpay, Melinda Buntin and Rena Conti said.
In January, a final rule went into effect that cut drug payments to 340B hospitals by almost 30%. The American Hospital Association and other groups are currently suing HHS over the rule. Earlier this month, the U.S. Court of Appeals for the District of Columbia Circuit heard oral arguments for the case.
While the cut reduces 340B revenue, Medicare will spend the money on other areas to maintain budget neutrality.
Coukell and Dickson caution that lawmakers must take into consideration the impact of changes to the program, noting that requiring 340B savings to be given directly to outpatient settings may negatively impact low-profit inpatient services. In addition, they warn that some 340B hospitals may now choose to opt out of the program to buy drugs at full price in order to garner standard Medicare reimbursement.
"The net effect would be to transfer Medicare spending from the 340B hospital to the pharmaceutical manufacturer. Similarly, any narrowing of 340B eligibility to a smaller set of qualifying institutions would transfer the corresponding share of government payment for drugs from the hospital or the clinic to the manufacturer," Coukell and Dickson write.
Senate HELP Committee Chairman Lamar Alexander, R-Tenn., has shown interest in requiring 340B hospitals and clinics to report how they use savings from the program, an idea that Trump supported in his proposed budget. The budget suggests pulling back payments if hospitals do not provide enough charity care, and a separate Council of Economic Advisers report proposed the creation of a new agency to set prices for providers and reduce "profiteering."
- JAMA Internal Medicine Diversity of Participants in the 340B Drug Pricing Program for US Hospitals
- JAMA Internal Medicine Reforming the 340B Drug Pricing Program Tradeoffs Between Hospital and Manufacturer Revenues
- Healthcare Dive 340B scrutinized in Senate, targeted by Trump
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