Billions of dollars a year are paid to American hospitals through the federal prescription drug reduction program known as the 340B.
A Supreme Court case this summer briefly thrust the little-known but highly controversial program into the spotlight. In 2018, the federal government cut payments to hospitals participating in the program, and a group of hospitals and professional associations sued.
The tribunal on the side of hospitals and rejected payment cuts, but the unanimous opinion did little to resolve the controversy that has dogged the 340B program for decades: Who should benefit — providers or patients?
We Asked Expert 340B and Trade-Off Research Editor Sayeh Nikpay to help explain how a program designed to help the most needy patients became so controversial.
Where does the 340B come from?
By all accounts, 340B started with good intentions.
Congress created the program in 1992 to help hospitals and clinics that cared for large numbers of low-income and uninsured patients, including large public hospitals, AIDS clinics and community health centers. They did this by forcing pharmaceutical companies to give these safety net providers deep discounts on prescription drugs. The exact amounts of the rebates are confidential, but government reports indicate that they can range from 20 percent at more than 50 percent.
How does the 340B work?
To understand 340B, it helps to follow the money.
Imagine someone needs a cancer drug that a drug manufacturer normally sells for $100,000. The company would have to sell this drug at a discount to a 340B hospital or clinic, so they would only pay $50,000.
But if an insured patient needs the same drug, the hospital or clinic can bill the insurance company or Medicare for the full $100,000 and pocket the $50,000 difference. This is called “spread,” and 340B providers can use this money to help cover free medications for uninsured people or to pay for other operational costs.
Why is the 340B so controversial?
Drug manufacturers and some policy makers argue that 340B should more directly help low-income people get prescription drugs instead of being routed through hospitals and clinics. Others say giving discounts to providers inevitably trickles down to patients in need.
The recent growth of the program has made this argument even more controversial.
Hospitals must apply to the federal government to register with 340B. When the program started in 1992, less than 3% of hospitals participated and they tended to see many low-income and uninsured patients.
But the eligibility rules for 340B are broad, and in 2009, 13% of hospitals were in the program, with many newer hospitals serving far fewer needy patients. The next year, the affordable care act allowed rural hospitals, cancer hospitals and others to join, regardless of the number of uninsured patients they served.
In 2020, about 40% of US hospitals had discounts, and the program now represents 38 billion dollarsor 7% of total drug spending in the United States.
The more insured patients a hospital has, the more money it can bring in with 340B. And even though hospitals with more insured patients are legally eligible to join the program (and can spend the money they bring in as they wish), their proliferation in the 340B has prompted drugmakers and some policymakers to accuse them of exploiting a vaguely worded law. their profits without doing much to help low-income patients.
What does the evidence say?
There are no reporting requirements to track how hospitals spend the money they bring in through 340B, making it difficult to know if they are using the money in accordance with the law’s goals of supporting patients. low-income patients.
But the studies we have (using less than perfect data) suggest that hospitals that joined the program more recently are finding ways to bring in more money through 340B as their spending on low-income patients and uninsured remain stable.
For example, there are studies showing the new 340Bs hospitals and the clinics they run are more likely to be located in counties with higher income levels and fewer uninsured patients, and than hospitals drug expenditure increase after joining 340B, which could lead to larger “spread” payments.
Any solutions in sight?
Suggested reforms have generally focused on heightened surveillance, greater transparency how hospitals use 340B savings and provide more direct funding safety net suppliers to limit their use of 340B.
But the program’s complexity and low profile make it difficult to reform. On top of that, there’s a lot of money at stake for hospitals and clinics, and it can be difficult to convince lawmakers to take funding away from institutions that are often pillars of their communities and huge employers.
The more the 340B grows and becomes a means for hospitals to increase their profits, the more the pharmaceutical companies are likely to back down.
At least 16 drug manufacturers currently refuse to offer discounts of 340 B at certain pharmaciesdrawing supplier outrage and federal government lawsuits. Federally funded clinics in particular say they rely on these savings and losing them could threaten the low-income patients they serve.
This story is from the Health Policy Podcast Compromisepartner of Public media on side effects. Dan Gorenstein is editor of Tradeoffs, Sayeh Nikpay is research editor and Ryan Levi is a reporter/producer on the show, which aired a version of this story on July 7.
Compromise Health Care Cost Coverage is backed, in part, by Arnold Ventures and West Health.