Dive Brief:
- Amid ongoing controversy over 340B drug discounts, a sweeping review suggests the program is doing what it was intended to do: generate revenue for hospitals, clinics and pharmacies by requiring drugmakers to give them discounts on medications.
- Yet researchers — who reviewed almost 300 pieces of literature on 340B for the new analysis — found mixed evidence on whether hospitals and clinics are using 340B revenue as intended, to care for low-income patients.
- That’s been a major criticism of the drug discount program, as drugmakers and some legislators say hospitals are not being held to account for their use of 340B funds.
Dive Insight:
The 340B Drug Pricing Program was created in 1992 to support hospitals caring for a disproportionate number of low-income populations, by requiring drugmakers to give those providers discounts on outpatient drugs. Those discounts can be steep — generally 20% to 50% off the list price of a drug.
Pharmaceutical companies strongly oppose the program, which cuts into their bottom lines. But in criticizing 340B, drugmakers say they’re raising critical questions of whether hospitals are responsible stewards of the program’s funds, especially as 340B grows.
As of 2020, there were more than 50,000 covered entities participating in the program, compared to 1,000 at 340B’s inception.
The new review published in JAMA Health Forum on Wednesday found some studies that suggested hospitals and other providers use revenue from the program to expand healthcare services for low-income patients, or subsidize uncompensated care.
Other studies suggested hospitals used the revenue to acquire physician practices and open new sites in more lucrative, higher-income areas — purposes “seemingly unrelated” to patient care, researchers said.
There is very little mandated reporting in 340B. Covered entities like hospitals are not required to share how they use revenue from the program. That lack of transparency makes it difficult to get a clear picture on what providers are doing with the funds, according to the review.
The review also found that, according to audits of covered entities, many providers aren’t complying with 340B’s existing requirements, like to not resell discounted drugs.
The pharmaceutical industry and some lawmakers have called for more guardrails in 340B requiring hospitals to account for their savings. Roughly 20 major drugmakers have also tried to limit the scope of the program by halting 340B discounts to providers that use community and specialty pharmacies, sparking lawsuits.
Court rulings on the challenges have been split across jurisdictions. Many cases are still pending, but one appeals court has ruled in favor of the drugmakers.
The new review stressed that 340B offers value to providers and patients, but zeroed in on the need for more regulatory oversight, especially in the area of transparency. For example, the government could require covered entities to report data on 340B revenue and their spending to the Health Resources and Services Administration, or HRSA, the agency that oversees 340B, researchers said.
“Increased transparency regarding the use of 340B program revenue and strengthened rulemaking and enforcement authority for [HRSA] would support compliance and help ensure the 340B program achieves its intended purposes,” researchers said.
Regulators have tried to curb rising 340B spending. In 2017, the CMS attempted to decrease Medicare reimbursement for 340B hospitals to account for the drug discounts, but the Supreme Court overturned the payment change in 2022 and directed regulators to repay affected hospitals.
