340B Health

Hospitals Report Using 340B Drug Discount Savings To Care for Low-Income, Rural Patients

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Washington, D.C.— A survey of 1,300 hospitals participating in the 340B drug discount program shows hospitals are using 340B savings to provide care to low-income and rural patients and the communities they serve. Hospital leaders cautioned that changes that reduce those savings or narrow the program’s scope would lead to cutbacks in care for vulnerable patients. Click here for the survey report and click here for an infographic summarizing the key findings.

For more than 25 years, the 340B drug pricing program has provided economic support to safety-net providers, their patients, and their communities. The 340B program requires drug manufacturers to provide discounts on outpatient drugs sold to qualified safety-net hospitals, clinics, and health centers. Savings from those discounts allow 340B providers to serve more patients and offer more services at no cost to taxpayers.

The survey results reflect the diversity in responses from disproportionate share (DSH) hospitals and rural hospitals. There was also considerable variation among DSH hospitals, likely due to the different sizes of 340B hospitals. For example, while DSH hospitals reported median 340B savings of between $5 million and $10 million a year, 23 percent reported less than $2 million in savings while 20 percent reported savings of more than $25 million.

There was much more consistency about how hospitals use their 340B savings. Both DSH and rural hospitals reported using savings to maintain or increase uncompensated care (95 percent) and expand services (89 percent). DSH hospitals also reported using 340B savings to offset losses due to low payments by Medicaid (80 percent).

Reflecting their smaller size, rural 340B hospitals estimated their savings at between $500,000 and $1 million a year, with 62 percent reported annual savings less than $1 million. Rural hospitals said 340B savings are often the difference between remaining open or joining the growing list of rural facilities that have closed their doors. Rural hospitals also highlighted the importance of contract pharmacies to serving their communities. Contract pharmacy arrangements account for more than half of rural hospitals’ 340B savings, likely because rural hospitals often do not operate their own in-house pharmacies.

“This is crystal clear evidence that the money saved from 340B drug discounts is being invested in more care for vulnerable patients and the expansion of needed, but often underpaid, services,” said Maureen Testoni, Interim President and Chief Executive Officer of 340B Health. “The findings illustrate the critical role that 340B plays in preserving the healthcare safety net.”

340B hospitals also indicated that they are dedicating resources to ensuring full compliance with federal rules, including audits by the Health Resources and Services Administration (HRSA), the agency that oversees the 340B program. DSH hospitals estimated their compliance costs at between $100,000 and $200,000 a year with an average of 2.4 full-time equivalent employees (FTEs) focused on that work. Rural hospitals estimated their compliance costs at under $100,000 a year with an average of 1.1 FTEs.

Baystate Health, a DSH hospital in Springfield, Mass., offered an example of how it uses its 340B savings: “Our four-hospital health system uses the 340B program savings to provide drugs to patients who otherwise could not afford them and to provide important pharmacy services throughout our communities. Whether it’s offering low-cost insulin products to our low-income patients, embedding pharmacists in our inner city clinics, or providing discharge liaisons at our academic medical center, the services we provide help with medication adherence and reduce admission rates.”

340B hospitals expressed concern about the potential impact of changes to 340B that would reduce their savings or, potentially, exclude them from the program. Hospitals responding to the survey said such moves would force them to cut back on uncompensated care (75 percent), reduce the offering of services that are often underpaid (70 percent), and scale back programs that provide drugs for free or at a deep discount (40 percent).

This is 340B Health’s first comprehensive annual survey of its 1,300+ nonprofit hospital and health system members about their participation in the 340B drug pricing program.  Past surveys looked at discrete aspects of members’ participation. The new annual survey is designed to provide useful information to policymakers and stakeholders on how the program operates in communities across the country. It also allows participating hospitals to benchmark their program activity against that of others and learn more about best practices. The 2017 survey was fielded in November-December 2017.

Contact: Richard Sorian at richard.sorian@340bhealth.org or 202-536-2285.

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