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ospitals and clinics serving high-risk, high-need patient populations, including low-income and uninsured individuals, have long benefitted from a federal program that allows them to buy medicines from drug makers at a steep discount.

But as a debate over drug pricing rages in Congress, there’s mounting evidence the 340B program has been exploited for profit under the guise of “doing good.”

The program, enacted with bipartisan support in 1992, has noble intentions. Estimates suggest the program saved participating entities up to $6 billion on drug acquisition costs in 2015. These savings provide a critical buffer to the cost of taking care of high-risk, high-need populations.

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Lawmakers are concerned that it has grown beyond its original intent. The 340B program includes about 40 percent of all U.S. hospitals and an even larger number of clinics — tens of thousands of them depend on these reduced drug prices.

Part of the concern is that benefits are not being used for the intended populations. A report by the Alliance for Integrity and Reform of 340B shows that charity care spending in 2014 for nearly two-thirds of 340B hospitals was less than the national average for similar hospitals.

In November 2017, the Trump administration announced plans to scale back how much participating organizations could benefit from the program, by reducing the rates at which Medicare would compensate hospitals and clinics for the cost of 340B drugs. The 28 percent decrease in reimbursement rates took effect in January 2018.

Within weeks, Reps. Mike Thompson (D-Calif.) and David McKinley (R-W.Va.) filed legislation to negate the effects of the Trump administration’s regulation. Within months, the PAUSE Act in the House and the HELP Act in the Senate followed, both calling for an overhaul of the current 340B program.

Sen. Bill Cassidy (R-La.), a physician who introduced the HELP Act, warned that “too often the program’s discounts are used to pad hospitals’ bottom lines instead of helping disadvantaged patients afford their treatments.”

Several studies suggest that the program increases the supply of certain drugs, some unnecessarily so, raises the cost of care, and some recipients pocket the profits rather than reinvest them into improving their care models.

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A study in the journal Health Services Research examined the impact of the 340B program on the cost of cancer care. It found that hospital participation in the program is associated with a shift of patients’ care from more affordable physician offices to more expensive hospital outpatient care centers, contributing to market-wide increases in per-patient spending.

Similarly, an article in the Journal of the American Medical Association suggested that the 340B program could encourage providers to use more expensive drugs. Because the program reduces acquisition costs but does not reduce reimbursement rates, providers could profit by purchasing more expensive drugs at a discount, getting reimbursed at the original higher price, and pocketing the difference. Drug manufacturers may even increase their list prices of 340B drugs to offset lost revenue.

A recent study in the New England Journal of Medicine found that the 340B program has led physicians to leave private practice to join hospital care teams and led to a spike in the use of drugs covered under the program in hospitals and clinics. However, the study did not find any evidence that hospitals have used the profits from the program to improve access to care or to reduce mortality rates among low-income patients.

These results are consistent with those of a study in Health Affairs that found that, in recent years, 340B hospitals have increasingly affiliated with clinics in affluent communities with higher rates of insurance as opposed to those that serve low-income populations with less coverage.

“Our results suggest that many hospitals have not responded as the program intended but have certainly followed the incentives,” said Harvard researcher Michael McWilliams, who co-authored the NEJM study with Sunita Desai, a health economist with New York University. “Ideally, we should have policies that help underserved patients directly, without distorting the incentives to provide drugs.”

Several reforms to the program have been proposed that could help limit the unintended consequences and encourage hospitals to use the drug discounts to advance the program’s goals.

For example, members of Congress have suggested that hospitals and clinics be held accountable for all cost savings accrued under the 340B program. Sen. Chuck Grassley introduced a bill to require hospitals and clinics to report both total costs of 340B drugs and total revenue from insurance companies for those same drugs.

Others have suggested that all profit from the 340B program should be reinvested into the high-risk, high-need populations that warranted eligibility in the first place.

Finally, the House Committee on Energy and Commerce proposed revising the eligibility for the 340B program so that it admits only organizations that serve large populations of high-risk, high-need patients, ensuring the intent of the program is intact.

The goal of assisting hospitals and clinics that provide care to vulnerable populations is noble. Corruption does not negate potential, nor does reform equate to failure. Long-term sustainability of the 340B program requires timely action that seeks to restore the program to its original intent.

Elsa Pearson, MPH, is a policy analyst at Boston University School of Public Health. Austin Frakt, Ph.D., is the director of the Partnered Evidence-based Policy Resource Center at VA Boston Healthcare System; an associate professor at BU School of Public Health; and an adjunct associate professor at Harvard T.H. Chan School of Public Health.

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  • Program has been in place since 1992. The discounts have never exceeded 2.5% of the total drug spend per year in the US. Has been consistently in that range for at least 10 years that I know of. The program has grown in number of participants, but dollar wise, that growth has been inconsequential due to restrictions such as orphan drug exclusions for Critical Access Hospitals and significant oversight from HRSA on providers. Expansion of Medicaid under the ACA changed charity care significantly, however it significantly increased Uncompensated Care. Medicaid patients are an automatic loss for hospitals and most providers. 340B helps those providers that care for a higher percentage of the high risk, high cost patients in the US. Exactly as Congress intended when it was implemented. The only program that really decreases the cost of medications to less fortunate patients every single day.

  • Readers are encouraged to grasp the county health rankings or the Aetna USNews Rankings to see the correlation between poor outcomes and less advantaged populations.

    Also the areas listed as bluer in the quality rankings also tend to be highest cost of housing. This of course drives those with less healthy bodies and finances from higher concentration and so-called “healthier” counties to lower concentration counties that have affordable and available housing.

    They join populations that already have the worst social and other determinants and half enough basic health access workforce and half enough local support resources. There is no indication of more support going their way in education, economics, or health care designs.

    These disparities help to anchor rural, lower concentration, 340 B, lower volume facilities as lower in “quality” while those more concentrated with better patients, plans, and finances have higher “quality.” Female, non-US origin, and younger hospitalists also tend to be in the places doing better and male, US origin, and older are found in lesser outcome settings.

    It is so easy to research using big data to get dramatic and published results. All you have to do is neglect context, follow assumptions, and fail to control for major differences in populations, practices, workforce, local resources, environments, situations, and conditions – the real forces that shape outcomes.

  • Have you no decency sir? It is very easy to use data sources to demonstrate lesser out comes where populations have concentrations of elderly, poor, Veterans, disabled, diabetes, COPD, smoking, mental illness, obesity, and other chronic diseases and conditions. In fact if you did not demonstrate lesser outcomes for any of the following, it would be surprising
    Rural hospitals vs urban
    Small hospitals vs large
    Low volume vs high
    2621 counties lowest in health care workforce concentrations including primary care, mental health, women’s health with the worst plans and the least local resources and the greatest complexities of care and population

    Or any facilities (340B)

    Or studies comparing types of physicians (older, white, male, US citizen) that are more concentrated in these counties and settings.

    Ridiculous Belief in Clinical or Digital Clinical Interventions

    As long as we allow fantasy belief to persist we will have experts who will demonstrate poor outcomes to address by more costly interventions. There is a ridiculous belief that a few minutes of health care shapes outcomes rather than decades of life experiences before and influences other than clinical during and after care experiences.

    Failure in Rigor in Studies, Especially “Quality” Studies

    There are too many social, local, personal, family, community, and other determinants that shape outcomes much more than clinical interventions that there should be no promise of improvements of outcomes. Populations that are more complex and are more limited are also being forced to such settings – due to collapse of affordable housing in counties with higher to highest concentrations of workforce.

    Apples to Oranges comparisons used to be rejected – but now they are promoted and appear in national reports.

    Severe Limitations in Funding

    Why expect more spending on outpatient or other areas. The finances are collapsing in these areas, facilities, and practices. Small hospitals are closing despite supports and because of payments too low, regulations accelerating cost, and complexity going through the roof. Small practices and basics (primary care, women’s health, mental health) are taken down by the same Triple Threat.

    Now one would not expect more funding if there are deficits by design.

    Pay for performance, value based, and readmission penalties discriminate against the providers where care is most needed – and the patients in these settings.

    Belief in data is what is hurting most Americans most behind – the ones that have least data or no data because they have little or no access.

    Poor controls, lack of controls, analysis aberrations, variations between groups less than variations within groups, tyranny of the mean, and apples to oranges flaws have been discussed. They should be applied, not denied.

  • A few omissions from the article. The sourcs AIR340B is funded solely dy the drug manufacturers that are attemting to get rid of the program. The sales of 340B drugs only represent less than 2% of all druggs sold in the US and is used only for outpatient encounters.

    The original expectation of the federal program as noted from Congress was to stretch federal dollars to keep access and to exand services to those that needed them. The program also effected by Medicaid patients which warrents the hospitals can not benefit from the 340B program and the mentioned reduction of Medicare reimbursement for those using 340B. It is also not mentioned the reimbursement reduction from these facilities are being redistributed to those hospitals that aee not required to treat people who can not afford treatment from those facilities. The redistribution of these savings from the program seems to me to be contrary to the intent of the original congressional program.

    Several of the studies referenced in this article has been deemed incomplete or too narrow in their conclusions by multiples reputable peep review panels.

    Current senate hearings on the program has called for transparency to determine how this program serves the public need but so far all I see in the header of this article is condemnation before all details are known. Transparency must be on all sides providers of healthcare, drug manufacturers, article authors, members of congress, members of the current administration, etc. to determine the accuracy and motivation of their actions. Last year the current administration killed HRSA guidences from being published that called for increased transparency that took almost 7 years to produce as was demanded twice by congress.

    This program has been in effect for 25 years and has been expanded twice by congress. So why is it now that after all these years is this such a program “gone awry”? Why not allow for reasonable calls for transparency be for all?

    In an time when drug costs are going up to all, why not make all reasons for the costs transparent? This would mean non-profit, for profit, goverment, drug manufacturers, insurance/PBM, providers, retail pharmacies, etc. would all have the same reporting requirements to be published by the same unbiased entity instead of “studies” that may or may not have limited parameters or what they are researching. Basis theory of statistics, the scope of your data being reviewed and your premise will effect the conclusions.

  • Sure. Don’t mention the benefits of 340B for uninsured patients of FQHCs that don’t have an in-house pharmacy. This benefit allows these patients to afford necessary medications that they pay for out of pocket when the medication is prescribed by an FQHC clinician to a 340B contracting pharmacy. The FQHC doesn’t make any money from this side of the program in this circumstance.

  • The article is too strong on the abuses and not strong enough on the benefits. It also leaves out the malicious, inaccurate opposition of the most greedy elements of PHARMA spreading fake news. In looking at the studies, it fails to understand a key fallacy in some of the studies — confusing association in time with causation. For instance, the discuss of cited study on cancer cost shifting fails to mention that CMS reimbursement changes on oncology have cut into lucrative (and abusive) oncologists profits from markups on purchased drugs. To really understand the 340B program one really needs to understand the overwhelmingly positive effect on access for the most vulnerable populations. 340B allowed Federally Qualified Health Centers, Public Hospitals and other safety net institutions to offer affordable drug prices to low income and uninsured patients. The program also blunted to some degree the rise of Medicaid pharmacy costs. When I was the Medical Director for Baltimore Medical System when 340B started, 340B was a huge blessing to our low income patients. As a consultant to FQHC’s in the early 90’s, I assisted a number of FQHC’s in setting up 340B programs to improve pharmacy access and evaluated several for the savings to FQHC’s in pharmacy cost showing over 40% lower pharmacy cost compared to pre 340B. The studies cited on people with insurance lose sight of the impact of pharmacy cost on the underinsured. The real villain here is the reliance of commercial insurers on copays and deductibles to indiscriminately limit pharmacy utilization. Cost has been clearly identified as key factor in non adherence raising overall health care costs and causing poor health outcomes. The data on cost in more affluent areas does not account for the rationale for some of the newer institutional beneficiaries of 340B which a more balanced segment of the population than the pure safety net providers in the initial rollout of 340B. However, the benefit to these parts the population is in terms for very high cost drugs for cancer, hemophilia and orphan drugs. That is going to skew the percentage of total dollars toward these more affluent segments. There is clear need for thoughtful reform in 340B. It needs to be done without damaging the safety net providers and vulnerable populations. The present proposals are poorly constructed and need change.

  • Really well-written and balanced article. The authors did a great job of addressing the keys points that typically aren’t reported.

    I must say I am shocked that a government program wasn’t used to it’s intentions, these almost always work (sarcasm).

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