340B: Serving Vulnerable Patients or Enriching Hospitals?
340B: Serving Vulnerable Patients or Enriching Hospitals?
When the 340B program was developed more than 20 years ago, fewer than 100 facilities in the United States qualified for 340B rebates. Eligible institutions included public health clinics, community mental health clinics and disproportionate share hospitals (DSH), which catered to a high percentage of uninsured or underinsured patients.
But over time, Congress introduced provisions that allowed more entities to fall under the 340B umbrella. In 1994, the Health Resources and Services Administration (HRSA) allowed outpatient facilities of a 340B-eligible hospital to participate in the program if the outpatient services could be reimbursed under Medicare.
From 2003 to 2010, Congress supported legislation that expanded 340B benefits to rural, small urban, and children's hospitals, as well as outpatient settings of cancer hospitals, rural referral centers, sole community hospitals, and critical-access hospitals. The criterion for a hospital's eligibility was based on the DSH percentage, or the share of low-income patients insured by Medicare and Medicaid. Although the metric aims to estimate the percentage of needy patients that a hospital treats, some critics contend that the DSH percentage is an inadequate representative for 340 eligibility because it is based on inpatient care and does not reflect the percentage of uninsured patients or charity care assumed by the hospital, nor the hospital's outpatient drug demands.
The expansion of 340B can also be traced by the HRSA's decision in April 2010 to allow 340B entities to contract with an unlimited number of pharmacies as opposed to just one, as HRSA originally had stated in 1996. According to HRSA, the number of contract pharmacies has increased from 3785 in 2010 to 30,046 in 2013.
One of the biggest drivers of 340B expansion appears to be an unintended consequence of the Medicare Modernization Act of 2003, which changed the Medicare reimbursement formula. Prior to 2003, Medicare felt that it was overpaying for these drugs and providing overly generous profit margins to private oncologists. In response, Congress reduced reimbursement to reflect the drug's sale price more closely. The legislation, which took effect in 2005, lowered the rate at which Medicare reimbursed oncologists for chemotherapy drugs by as much as 75%. The decreased reimbursement for drugs left many oncology clinics and private practices unable to survive financially, with some going bankrupt or selling their practice to a hospital. Between 2007 and 2013, 288 oncology clinics shut their doors and 469 were purchased by a hospital, according to research conducted by the Community Oncology Alliance (COA).
According to a 2013 ASCO survey, 63% of smaller community practices said they might merge, sell, or close in the next year. This landscape of cancer care, which appears to be shifting care away from private practices and community clinics and towards hospitals, may be allowing some 340B hospitals to expand their 340B patient network.
The cost of agents has gotten so high that smaller practices have had a lot of difficulty keeping their head above water economically because they aren't eligible for 340B pricing or don't have the sway to negotiate better discounts with drug manufacturers that a larger system can.
"I think 340B probably drives some of the consolidation of oncology care that we're seeing," Dr Peace said. "The cost of agents has gotten so high that smaller practices have had a lot of difficulty keeping their head above water economically because they aren't eligible for 340B pricing or don't have the sway to negotiate better discounts with drug manufacturers that a larger system can. Without 340B pricing and robust negotiating power, it is likely difficult for many of these independent practices to survive too long in the current system."
Given the expanding scope of 340B, there has also been debate over which patients should qualify for 340B discounts. According to HRSA's 1996 definition, a patient is an individual treated by a covered entity regardless of his or her insurance status. Under most conditions, Medicaid-insured patients are excluded from 340B rebates, but the definition does not otherwise specify the patient's insurance coverage or ability to pay. Thus, a fully insured patient treated in the outpatient setting can receive drugs at 340B prices.
"These safety-net hospitals are allowed to pass the discounts on to needy outpatients and also sell the medications to insured individuals at negotiated rates," a spokesperson for Safety Net Hospitals for Pharmaceutical Access (SNHPA) told Medscape. "They can then use the funds generated to provide vital clinical and specialized services for people who cannot afford to pay for care."
But, Rena Conti, PhD, an assistant professor of hematology/oncology in the Department of Pediatrics at the University of Chicago, pointed out that such a broad definition of a 340B-eligible patient means that some hospitals will bill a patient and insurer at the full price of a drug and pocket the difference. "In this scenario, a 340B hospital is overcharging insured patients and their insurers," Dr Conti said. "In exchange for this money, there is very limited oversight regarding whether these profits are being used to help more vulnerable patients receive care."
Indeed, she points out that, according to a report commissioned by SNHPA, only approximately 30% of the 290 hospital systems participating in the survey said that they use their 340B profits to reduce or eliminate prescription drug copayments, 15% of respondents use them to implement or maintain patient medication therapy management programs, and 4% use 340B profits for disease management programs to improve quality of care.
Dr Conti is not alone in her concern that some 340B hospitals are failing to reinvest the profits gleaned from the drug discounts into their needy-patient population. In October 2012, senator Chuck Grassley (R-Iowa) sent letters to three hospitals in North Carolina—Duke University Hospital, Carolinas Medical Center, and University of North Carolina Hospital—inquiring about the revenue they received from 340B and how they reinvested those savings to benefit uninsured patients.
In its response, Duke University Hospital reported saving $48.3 million from 340B drug discounts in 2012, and a total of $158.4 million over 5 years. But only 5% of the patients for whom the hospital claimed a 340B discount were uninsured. The other 95% had Medicare, Medicaid, or private insurance.
Duke University Hospital also boasted spending about $69 million in charity care in 2012, but "arguably, some or all of these expenditures or discounts are provided in return for nonprofit status," said Adam Fein, PhD, president of Pembroke Consulting, Inc., and CEO of Drug Channels Institute in Philadelphia. According to its publically available tax returns, Duke University Hospital earned over $2.5 billion in 2012 and thus spent about 2.75% of its budget on charity care, which is below the national average of 3.3% for charity care provided by all hospitals.
"That's an enormous amount Duke is earning, and ultimately it's not clear that that money from 340B is benefiting the uninsured or indigent patients in any way," said Dr Fein. "The problem is that there are very worthy safety-net providers that need financial assistance, but there are many others that don't and are taking it in the absence of any regulations or oversight."
Sen. Grassley's inquiries spurred an investigation by the Office of Inspector General as well as expanded oversight from HRSA. In 2013, the Office of Inspector General interviewed 30 340B institutions to learn how they operate and manage their contract pharmacy arrangements. In the sample, seven of 15 DSH hospitals reported not offering 340B discounts to uninsured patients, and one of 15 community health centers failed to do so. Of the remaining 22 covered entities, 18 reported offering the discounted 340B price to uninsured patients in at least one of their contract pharmacy arrangements, and four did not provide sufficient information for the authors to conclude whether uninsured patients received the discounts. The report stated that although neither the 340B statute nor HRSA guidelines addresses whether covered entities must provide discounts to uninsured patients, without these discounts, uninsured patients end up paying full price for their prescription drugs.
In February 2013, the Office of Pharmacy Affairs performed its first audits of 340B hospitals and required all to recertify for the program. According to the federal official in charge of the program, over the course of its audits, the Office inspected 51 hospitals and expelled 271 treatment sites from the program.
Several other recent analyses have attempted to understand how 340B hospitals, clinics, and contract pharmacies are using the program. A report published earlier this year found that expansions of DSH hospitals and outpatient clinics may be increasingly serving a wealthier and more insured patient population. Specifically, the study uncovered that from 2004 on, 340B DSH hospitals and affiliated clinics tended to be in communities with fewer low-income people than those registered before 2004.
"Our take-away was that 340B discounts are likely generating substantial profits from the insured patients treated in these hospital-affiliated clinics," Dr Conti said. "With the data we have, we have no way of understanding exactly how much money is being made off of 340B by each of these institutions, or how those profits are being used to care for underinsured, uninsured, and medically needy patients."
In another study, Dr Conti teamed up with Walgreens, which boasts the largest network of 340B contract pharmacies in the United States, to provide a cross-sectional snapshot of all drugs dispensed through Walgreens via 340B in 2012. The aim of the study, published on November 3, was to determine what patterns emerged when comparing the drugs coming through 340B with all drugs dispensed by Walgreens. The analysis revealed that 340B prescriptions amounted to less than 1% of all prescriptions filled through Walgreens. Antiretroviral drugs were much more likely to be dispended to 340B-eligible patients, and the rest of the drugs flowing through the program treat the chronic disease burden of the entire US population.
"These findings appear to be consistent with how the 340B contract pharmacy program should be operating." Dr Conti said. "We have other evidence to suggest that Walgreens' contract pharmacies are actively serving poor and medically needy communities."
One finding, however, gave Dr Conti cause for concern. She found that the rate of generic dispensing in the overall population is about 80% across all therapeutic classes for all drugs, but in certain therapeutic categories, the percentage of 340B branded drugs dispensed by these pharmacies was dramatically higher—almost double in some cases—compared with all dispensing.
"This finding is puzzling because generic drugs provide as much clinical benefit as their branded counterparts, at dramatically lower prices for patients and payers," Dr Conti said. But she acknowledged that this study could not examine the records of specific patients and why the use of the branded drug over the generic counterpart may be medically indicated. "This is an important direction for future work."
Controversy Over 340B Expansion and Oversight
When the 340B program was developed more than 20 years ago, fewer than 100 facilities in the United States qualified for 340B rebates. Eligible institutions included public health clinics, community mental health clinics and disproportionate share hospitals (DSH), which catered to a high percentage of uninsured or underinsured patients.
But over time, Congress introduced provisions that allowed more entities to fall under the 340B umbrella. In 1994, the Health Resources and Services Administration (HRSA) allowed outpatient facilities of a 340B-eligible hospital to participate in the program if the outpatient services could be reimbursed under Medicare.
From 2003 to 2010, Congress supported legislation that expanded 340B benefits to rural, small urban, and children's hospitals, as well as outpatient settings of cancer hospitals, rural referral centers, sole community hospitals, and critical-access hospitals. The criterion for a hospital's eligibility was based on the DSH percentage, or the share of low-income patients insured by Medicare and Medicaid. Although the metric aims to estimate the percentage of needy patients that a hospital treats, some critics contend that the DSH percentage is an inadequate representative for 340 eligibility because it is based on inpatient care and does not reflect the percentage of uninsured patients or charity care assumed by the hospital, nor the hospital's outpatient drug demands.
The expansion of 340B can also be traced by the HRSA's decision in April 2010 to allow 340B entities to contract with an unlimited number of pharmacies as opposed to just one, as HRSA originally had stated in 1996. According to HRSA, the number of contract pharmacies has increased from 3785 in 2010 to 30,046 in 2013.
One of the biggest drivers of 340B expansion appears to be an unintended consequence of the Medicare Modernization Act of 2003, which changed the Medicare reimbursement formula. Prior to 2003, Medicare felt that it was overpaying for these drugs and providing overly generous profit margins to private oncologists. In response, Congress reduced reimbursement to reflect the drug's sale price more closely. The legislation, which took effect in 2005, lowered the rate at which Medicare reimbursed oncologists for chemotherapy drugs by as much as 75%. The decreased reimbursement for drugs left many oncology clinics and private practices unable to survive financially, with some going bankrupt or selling their practice to a hospital. Between 2007 and 2013, 288 oncology clinics shut their doors and 469 were purchased by a hospital, according to research conducted by the Community Oncology Alliance (COA).
According to a 2013 ASCO survey, 63% of smaller community practices said they might merge, sell, or close in the next year. This landscape of cancer care, which appears to be shifting care away from private practices and community clinics and towards hospitals, may be allowing some 340B hospitals to expand their 340B patient network.
The cost of agents has gotten so high that smaller practices have had a lot of difficulty keeping their head above water economically because they aren't eligible for 340B pricing or don't have the sway to negotiate better discounts with drug manufacturers that a larger system can.
"I think 340B probably drives some of the consolidation of oncology care that we're seeing," Dr Peace said. "The cost of agents has gotten so high that smaller practices have had a lot of difficulty keeping their head above water economically because they aren't eligible for 340B pricing or don't have the sway to negotiate better discounts with drug manufacturers that a larger system can. Without 340B pricing and robust negotiating power, it is likely difficult for many of these independent practices to survive too long in the current system."
Given the expanding scope of 340B, there has also been debate over which patients should qualify for 340B discounts. According to HRSA's 1996 definition, a patient is an individual treated by a covered entity regardless of his or her insurance status. Under most conditions, Medicaid-insured patients are excluded from 340B rebates, but the definition does not otherwise specify the patient's insurance coverage or ability to pay. Thus, a fully insured patient treated in the outpatient setting can receive drugs at 340B prices.
"These safety-net hospitals are allowed to pass the discounts on to needy outpatients and also sell the medications to insured individuals at negotiated rates," a spokesperson for Safety Net Hospitals for Pharmaceutical Access (SNHPA) told Medscape. "They can then use the funds generated to provide vital clinical and specialized services for people who cannot afford to pay for care."
But, Rena Conti, PhD, an assistant professor of hematology/oncology in the Department of Pediatrics at the University of Chicago, pointed out that such a broad definition of a 340B-eligible patient means that some hospitals will bill a patient and insurer at the full price of a drug and pocket the difference. "In this scenario, a 340B hospital is overcharging insured patients and their insurers," Dr Conti said. "In exchange for this money, there is very limited oversight regarding whether these profits are being used to help more vulnerable patients receive care."
Indeed, she points out that, according to a report commissioned by SNHPA, only approximately 30% of the 290 hospital systems participating in the survey said that they use their 340B profits to reduce or eliminate prescription drug copayments, 15% of respondents use them to implement or maintain patient medication therapy management programs, and 4% use 340B profits for disease management programs to improve quality of care.
Dr Conti is not alone in her concern that some 340B hospitals are failing to reinvest the profits gleaned from the drug discounts into their needy-patient population. In October 2012, senator Chuck Grassley (R-Iowa) sent letters to three hospitals in North Carolina—Duke University Hospital, Carolinas Medical Center, and University of North Carolina Hospital—inquiring about the revenue they received from 340B and how they reinvested those savings to benefit uninsured patients.
In its response, Duke University Hospital reported saving $48.3 million from 340B drug discounts in 2012, and a total of $158.4 million over 5 years. But only 5% of the patients for whom the hospital claimed a 340B discount were uninsured. The other 95% had Medicare, Medicaid, or private insurance.
Duke University Hospital also boasted spending about $69 million in charity care in 2012, but "arguably, some or all of these expenditures or discounts are provided in return for nonprofit status," said Adam Fein, PhD, president of Pembroke Consulting, Inc., and CEO of Drug Channels Institute in Philadelphia. According to its publically available tax returns, Duke University Hospital earned over $2.5 billion in 2012 and thus spent about 2.75% of its budget on charity care, which is below the national average of 3.3% for charity care provided by all hospitals.
"That's an enormous amount Duke is earning, and ultimately it's not clear that that money from 340B is benefiting the uninsured or indigent patients in any way," said Dr Fein. "The problem is that there are very worthy safety-net providers that need financial assistance, but there are many others that don't and are taking it in the absence of any regulations or oversight."
Sen. Grassley's inquiries spurred an investigation by the Office of Inspector General as well as expanded oversight from HRSA. In 2013, the Office of Inspector General interviewed 30 340B institutions to learn how they operate and manage their contract pharmacy arrangements. In the sample, seven of 15 DSH hospitals reported not offering 340B discounts to uninsured patients, and one of 15 community health centers failed to do so. Of the remaining 22 covered entities, 18 reported offering the discounted 340B price to uninsured patients in at least one of their contract pharmacy arrangements, and four did not provide sufficient information for the authors to conclude whether uninsured patients received the discounts. The report stated that although neither the 340B statute nor HRSA guidelines addresses whether covered entities must provide discounts to uninsured patients, without these discounts, uninsured patients end up paying full price for their prescription drugs.
In February 2013, the Office of Pharmacy Affairs performed its first audits of 340B hospitals and required all to recertify for the program. According to the federal official in charge of the program, over the course of its audits, the Office inspected 51 hospitals and expelled 271 treatment sites from the program.
Several other recent analyses have attempted to understand how 340B hospitals, clinics, and contract pharmacies are using the program. A report published earlier this year found that expansions of DSH hospitals and outpatient clinics may be increasingly serving a wealthier and more insured patient population. Specifically, the study uncovered that from 2004 on, 340B DSH hospitals and affiliated clinics tended to be in communities with fewer low-income people than those registered before 2004.
"Our take-away was that 340B discounts are likely generating substantial profits from the insured patients treated in these hospital-affiliated clinics," Dr Conti said. "With the data we have, we have no way of understanding exactly how much money is being made off of 340B by each of these institutions, or how those profits are being used to care for underinsured, uninsured, and medically needy patients."
In another study, Dr Conti teamed up with Walgreens, which boasts the largest network of 340B contract pharmacies in the United States, to provide a cross-sectional snapshot of all drugs dispensed through Walgreens via 340B in 2012. The aim of the study, published on November 3, was to determine what patterns emerged when comparing the drugs coming through 340B with all drugs dispensed by Walgreens. The analysis revealed that 340B prescriptions amounted to less than 1% of all prescriptions filled through Walgreens. Antiretroviral drugs were much more likely to be dispended to 340B-eligible patients, and the rest of the drugs flowing through the program treat the chronic disease burden of the entire US population.
"These findings appear to be consistent with how the 340B contract pharmacy program should be operating." Dr Conti said. "We have other evidence to suggest that Walgreens' contract pharmacies are actively serving poor and medically needy communities."
One finding, however, gave Dr Conti cause for concern. She found that the rate of generic dispensing in the overall population is about 80% across all therapeutic classes for all drugs, but in certain therapeutic categories, the percentage of 340B branded drugs dispensed by these pharmacies was dramatically higher—almost double in some cases—compared with all dispensing.
"This finding is puzzling because generic drugs provide as much clinical benefit as their branded counterparts, at dramatically lower prices for patients and payers," Dr Conti said. But she acknowledged that this study could not examine the records of specific patients and why the use of the branded drug over the generic counterpart may be medically indicated. "This is an important direction for future work."
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