Studies Confirm 340B Drug Discount Program Helps Hospitals Serve Low-Income and Rural Patients without Raising Drug Prices

July 17, 2017 in 340B Health News Releases

Counters Recent Claims Made by Drug Industry

Washington, D.C., July 17, 2017 — More than $457 billion is spent on prescription drugs in America annually. Access to healthcare, however, remains a struggle for many Americans. A 25-year-old drug discount program called 340B ensures that low-income, Medicaid, uninsured, and underinsured patients can get necessary treatment for medical conditions. These discounts cost taxpayers zero dollars. 340B lets America’s safety-net hospitals access prescription medicines at a discount. Hospitals use the money they save to reduce prices for patients, provide uncompensated care, and remain operational despite lower Medicaid reimbursement for healthcare services.

To put it in context, roughly 78 percent of the 1,300 critical access hospitals in the U.S. rely on 340B. 340B DSH hospitals, meanwhile, treat a disproportionate share of low-income patients, serving 64 percent more Medicaid and low-income Medicare patients, and more than 60 percent more low-income cancer patients than non-340B hospitals.

In its continued interest in transparency, 340B Health, the association of more than 1,300 340B hospitals, today released two reports: The first report assesses 340B’s financial impact on the drug industry. The second report evaluates the value of contract pharmacies for 340B hospitals and their patients. (Click here for an overview of the first report and here for an overview of the second.)

“We hope the Trump administration and Congress pay close attention to these important studies,” said 340B Health President and Chief Executive Officer Ted Slafsky. “They show 340B discounts aren’t burdening drug manufacturers, aren’t pulling from taxpayer dollars or shifting costs to other payers, and are generating funds hospitals desperately need to cover unreimbursed costs, provide services to low-income and rural patients, and, in some cases, keep their doors open.”

Other Manufacturer Discounts and Programs Trounce the 340B Discount

The first report revealed the 340B program represents a small fraction of promotional spending and discounts by manufacturers. Discounts for for-profit health plans and pharmacy benefit managers are far greater than 340B, yet recent industry-sponsored reports failed to put this in perspective.

1. The Largest Portion of Manufacturer Discounts and Rebates Go to Health Plans and Pharmacy Benefit Managers (PBM). Negotiated health plan and PBM rebates from pharmaceutical companies were $58 billion in 2015 and accounted for 34 percent of all rebates and discounts (54 percent of all brand-name rebates). By contrast, 340B discounts accounted for 3.6 percent of total discounts or $6.1 billion.
2. The Overall Cost of the 340B Program Represents Just 1 Percent of Overall U.S. Drug Spending. Drug Companies Spend 4 Times As Much on Advertising. The total amount of 340B discounts in 2015 was about 1 percent ($6.1 billion) of the $457 billion in net U.S. drug spending.
3. The 340B Discount Is Only 4 Percent of Specialty Drug Spending. Specialty drug growth is often cited as a driver of overall drug spending, yet 340B was a small share of specialty drug spending in 2015, indicating 340B is not behind growth in specialty drugs or the overall market.

Contract Pharmacies Are Critical to 340B Hospitals

The second report outlined how hospitals rely on their contract pharmacy benefit.  Disproportionate share (DSH) hospitals reported focusing on using their contract pharmacy benefit to support uncompensated care and provide direct services to low-income patients. Rural hospitals were more likely to report using their benefit to maintain access to care, namely by maintaining operations and keeping their doors open.

1. DSH Hospitals Use Savings to Provide More Services to Low-Income Patients. Seventy-four percent of DSH respondents reported using their contract pharmacy benefit to provide more services despite low Medicaid payments. This finding is meaningful, given that 340B DSH hospitals treat so many Medicaid patients. National data show that 340B DSH hospitals treat 64 percent more Medicaid and low-income Medicare patients than non-340B hospitals.
2. 340B Savings Go to Enhance Patient Treatment Services – Not Pad the Bottom Line. Nearly all DSH hospitals with contract pharmacies (95 percent) reported using their contract pharmacy benefit to treat at least one of the diseases or conditions listed, with oncology and diabetes being the two most commonly chosen (77 percent each), followed by cardiac diseases at 68 percent. Hospitals also use the savings to maintain/provide more uncompensated care (89 percent).
3. Contract Pharmacies Help Rural Hospitals Maintain Operations. Eighty rural hospitals have closed since 2010 and many more are squeezed by reduced reimbursements and rising healthcare costs. The number one way rural hospitals reported relying on their contract pharmacy benefit was to keep their doors open (87 percent), whereas across all hospitals, maintaining and providing uncompensated care was the most reported response.
4. Contract Pharmacies Ensure That Patients Have Access to Specialty Products. Seventy-two percent of hospitals that contract with specialty pharmacies reported entering into the arrangements to access additional resources to support care for low-income and rural patients, and 66 percent reported entering into the arrangements to improve low-income and/or rural patients’ access to specialty drugs.

“These reports unequivocally demonstrate how 340B hospitals provide significantly higher levels of care to low-income patients without tapping into taxpayer dollars, to reach the most vulnerable people in our communities,” added Slafsky. “At a time when we face unprecedented health care challenges, it is important for our leaders to avoid cutting a hole in the strongest safety net for patients in our urban and rural communities.”

Contact Tom Mirga at tom.mirga@340bhealth.org or 202-552-5853.