First enacted by the Congress in 1992, the 340B drug pricing program allows clinics and hospitals serving a large number of low-income, uninsured patients to purchase medicines from pharmaceutical companies at steep discounts. Drug manufacturers that want their drugs covered by Medicaid are required to participate in the 340B program and the Medicaid Drug Rebate Program.
Since the program’s implementation, the number of eligible entities has grown. According to non-profit policy think tank Rand Corporation, eligibility was further extended by the Affordable Care Act (ACA). Nearly 40% of the country’s hospitals benefit from the federal program. Have a look at the full list of eligible organizations here.
Impact of the 340B program on healthcare organizations
Cost savings from the program help healthcare organizations continue catering to high-need populations in underserved communities, and to provide more comprehensive services such as HIV/AIDs treatments, labor and delivery, and trauma care. The discounted rates go a long way in ensuring the survival of some covered entities. According to the American Hospital Association (AHA), the 340B program enables covered entities to achieve savings of 25 to 50 percent, which they can use to improve affordability and their care model.
Chicago’s University of Illinois Hospital & Health Sciences System used its 340B savings to establish a clinic that helps patients manage their medication regimen and a program for patients to find alternative payments sources for medications. Intermountain Healthcare in Salt Lake City has started diabetes and cystic fibrosis clinics, while Genesis Healthcare System in Zanesville, Ohio, has created a black lung clinic to serve a community where coal mining is a major industry.
Criticisms of the 340B program
There is some debate around the unintended consequences of the program. Critics have argued that the rise in the number of participants is driven by those seeking to take advantage of drug discounts in primarily generating profits. A study found that 340B hospitals that registered for the program after 2004 served wealthier communities with high rates of health insurance.
The 340B program lowers drug acquisition costs but does not reduce reimbursement rates. This creates an opportunity for participants to get reimbursed at the original price and make extremely large profits, which can have a paradoxical effect on the costs of patient care, especially those receiving cancer treatment. Hospitals have argued that they need the profits to fund other services operating at a loss.
Pressure from drug manufacturers
Drug makers have lobbied to reform the 340B program, arguing that it has gotten too big. The decision in 2017 by the Trump administration to cut reimbursement rates by 28 percent went into effect in January 2018. It has been unsuccessfully challenged in court, with healthcare consulting firms attributing the vagueness of the original 340B legislation to the dramatic growth in participating entities, among them providers that serve fewer disadvantaged patients.
The five major pharmaceutical companies have sought to reduce 340B drug discounts, and demanded that hospitals abide by the individual requirements stipulated by each company, including detailed reports that check for duplicate discounts.
Contact us today to learn more about 340B and how it may fit into your practice.