Dive Brief:

• Hospital groups and pharmacy benefit managers are ringing the alarm around increasingly restrictive drug company policies in the 340B drug discount program resulting in growing financial losses for safety-net hospitals on money they say they're owed.
• A new survey of more than 500 hospitals by lobbying group 340B Health estimated that the annual financial impact from drug company restrictions has doubled since the end of 2021, costing hospitals millions of dollars per year.
• Meanwhile, CVS Health — parent company of pharmacy benefits manager Caremark — said its 340B product lines were stagnant in the first quarter partially due to the drugmaker policies.

Dive Insight:

The three-decade-old 340B program requires drugmakers to charge hospitals only the statutory ceiling prices for eligible outpatient drugs. The idea is that savings will flow into care for low-income patients and rural communities, though critics of the program — notably, drugmakers and some lawmakers — argue the program needs more oversight, as hospitals don't need to account for how they use savings.

Disputes over the program stretch back to summer 2020, when drugmakers began imposing restrictions on 340B discounts. Some stopped giving the 340B ceiling price on their drugs sold to the providers and dispensed through contract pharmacies. Others limited sales by selling products only after a covered entity demonstrated 340B compliance or released data.

The policies sparked legal challenges from HHS' Health Resources and Services Administration, which administers the program.

Four district court decisions — two in favor of HRSA, and two in favor of the drug companies — are currently pending appeals.

At the time of 340B Health's last survey, conducted in December, just eight drug companies had imposed restrictions on 340B discounts to hospitals for medication dispensed at community-based and specialty pharmacies.

However, by March — the time of the new research — that number had risen to 14. Since then, two more pharmaceutical companies — Johnson & Johnson and Gilead — have announced new restrictions.

More drug companies restricting discounts has "rapidly exacerbated the problem," especially as they increasingly limit discounts for pricey specialty drugs hospitals obtain using multiple specialty pharmacies, 340B Health said.

The report found larger, mostly urban hospitals estimate their median loss from the restrictions at $2.2 million a year, more than double the $1 million predicted in December. A tenth of them expect their losses to exceed $21 million a year.

Critical access hospitals project a median loss of $448,000 a year, also double the $220,000 predicted in December. A tenth expect their losses to top $1.3 million a year.

A majority of respondents said the restrictions are resulting in delays in access to needed drugs and financial hardships from higher bills. A smaller percentage of 41% said they were leading to worsened health outcomes.

If the restrictions became permanent, more than three-quarters of facilities said they'd likely have to cut health services and patient support programs.

A third of smaller, mostly rural hospitals said the restrictions put them at risk of closure.

In a statement, 340B Health CEO Maureen Testoni slammed the drug companies for "draining vital resources" from the healthcare safety net to pocket more profit for themselves.

Drug interests, however, highlight the program's need for transparency, along with the fact that hospitals receiving discounts from contract pharmacies was never authorized by Congress. Pharmaceutical manufacturers also argue the 340B program drives patient costs higher in the long-term.

The restrictions aren't just affecting hospital finances, however, with CVS Caremark also seeing a drag.

"Subsequent to when we put out guidance last year, there were a number of I would — I guess I would phrase it as the manufacturers continuing to write their own regulations and deciding what they were and weren't going to apply pricing to. And so that reduces the volume," Alan Lotvin, CVS EVP and president of pharmacy services, said. "So when the volume goes down, covered entities make less money, which is the entire reason for the existence of the 340B program. Our clients don't have access to lower-cost drugs."

Lotvin noted CVS eventually expects manufacturers to reopen contract pharmacy discounts and that volume to return, though timing is unclear.