The 340B Drug Pricing Program has change into one of the vital controversial applications within the U.S. healthcare system. This system was established in 1992 to assist security internet suppliers stretch federal assets and higher serve susceptible populations by permitting eligible hospitals and clinics to buy outpatient medication at steeply discounted costs. Nonetheless, disputes over this system’s cash movement, oversight and misuse have fueled decades of conflict amongst suppliers, pharmaceutical producers and lawmakers.
Some argue that 340B is a lifeline for struggling hospitals and clinics, and others painting it as a loophole that enables well being programs to revenue from reductions meant for individuals with little to no revenue.
Over time, the 340B program has grown to incorporate many massive well being programs — lots of them well-capitalized nonprofits. For instance, well being programs together with Ascension, CommonSpirit Health, Geisinger, Penn Medicine and Providence take part in 340B.
There’s additionally rigidity across the program’s opacity — hospitals aren’t required to indicate how they use 340B financial savings, which additional leads critics to query whether or not these reductions really profit sufferers. Underneath 340B, hospitals should buy discounted medication after which invoice insurers on the full charge. Pharmaceutical firms accuse hospitals of retaining the distinction as revenue, with no authorized requirement to cross alongside financial savings to sufferers.
Data exhibits that giant, tax-exempt suppliers buy tens of billions of {dollars}’ value of medication via the 340B program — however there isn’t a information displaying that the common American is paying much less on the pharmacy counter.
This system additionally is a large driver of the nation’s drug spending. Whereas the medication are offered at a closely discounted charge, this system can nonetheless contribute to increased total drug spending as a result of suppliers are sometimes reimbursed at or close to full worth. The overall worth of medication flowing via 340B now surpasses Medicare Half B and Medicaid, and nearly surpasses Medicare Half D.
Now, reform has lastly come — but it surely doesn’t appear to be the brand new mannequin will handle this situation or ship actual change.
In January, HHS’ Health Resources and Services Administration (HRSA), will start a pilot program permitting drugmakers to take part voluntarily in a rebate-based low cost system. As a substitute of the supplier receiving a reduction upfront at buy, the 340B low cost can be utilized after buy by way of rebate — and topic to information submission necessities.
The pilot goals to spice up transparency and stop duplicate reductions, but it surely additionally introduces monetary challenges and added administrative burdens that may probably disproportionately have an effect on the smaller, security internet suppliers that the 340B program was initially designed to help.
Rebate mannequin means money movement woes & extra administrative work
The brand new rebate mannequin will create new money movement issues, notably for smaller clinics, mentioned Invoice Keeton. He’s chief advocacy officer at Vivent Health, a nationwide supplier of HIV take care of low-income sufferers, in addition to a key determine inside Ryan White Clinics for 340B Access, a gaggle that advocates for 340B program entry.
Keeton famous that cash movement points might be particularly acute for organizations like his which have to purchase HIV drugs, that are extremely costly. As an example, Biktary, the most well-liked remedy used to deal with HIV, prices about $4,200 per month.
Underneath 340B, clinics pay about half of that, however the rebate mannequin may power clinics to entrance the total price briefly, Keeton mentioned.
“For various smaller clinics which might be working on a lot tighter margins — and going through reducing alternatives to generate any form of income, whether or not it’s via grants or reimbursement — that skill to buy these drugs goes to be horribly difficult,” he remarked.
He additionally identified that contract pharmacies might not be capable to provide reductions upfront to cash-pay sufferers, which shifts monetary threat onto sufferers and clinics.
The added administrative burden might be robust to take care of too, Keeton added.
HRSA’s new mannequin requires suppliers to submit detailed patient- and prescription-level information for each eligible 340B drug, which he mentioned provides one other layer of administrative work that would put pressure on care groups which might be already burnt out.
Clinics would wish to rent and prepare workers to navigate Beacon, the platform HRSA is utilizing to course of rebate transactions, which diverts funds away from direct care or addressing sufferers’ social determinants of well being, Keeton defined.
The American Hospital Association (AHA) has additionally expressed concern in regards to the administrative duties related to the brand new rebate program, contending that the burden might be far larger than what has been estimated by HRSA.
In a September 30 letter to the company, the AHA famous that HRSA estimated 1.5 million hours of added labor per 12 months for hospitals. HRSA primarily based this on the idea that every hospital would solely want about 2 hours per week to submit the required information — however AHA’s member hospitals mentioned this can be a very low assumption.
They venture needing as much as two full‑time equal workers per hospital, which equals roughly 4,160 hours per hospital per 12 months — which the AHA famous is way increased than HRSA acknowledged.
The AHA additionally argued that hospitals’ compliance prices may vary from $150,000 to greater than $500,000 per hospital.
“And these prices don’t embody the hundreds of thousands of {dollars} 340B hospitals can be offering to drug firms as interest-free loans via the rebate mannequin. Additionally they don’t embody the nonmonetary burdens that sufferers and communities will endure, and hospitals will then have to deal with, as a result of 340B lined entities could have fewer assets for well being care companies,” the group wrote in its letter.
The AHA mentioned that when calculated precisely, “there isn’t a method” the advantages of HRSA’s new pilot program may outweigh the burden it can inflict on suppliers.
Pharmaceutical assist for the rebate mannequin
The pharmaceutical trade views the brand new pilot as a approach to enhance transparency and accountability within the 340B program. Extremely influential lobbying group Pharmaceutical Analysis and Producers of America PhRMA has been a significant proponent of the brand new mannequin.
“We encourage HRSA to maneuver swiftly to broaden use of the rebate throughout all 340B lined outpatient medication, enabling wider use of rebates throughout the program. Increasing this pilot would assist strengthen program integrity whereas preserving crucial assist for true security internet suppliers and the sufferers they serve,” PhRMA mentioned in an announcement despatched to MedCity Information.
To date, eight drugmakers have agreed to take part in HRSA’s 340B rebate pilot program: AbbVie, Amgen, AstraZeneca, Boehringer Ingelheim, Bristol Myers Squibb, Merck, Novo Nordisk and Johnson & Johnson.
Typically, they appear to view the rebate mannequin as a approach to strengthen 340B oversight and compliance.
In an emailed assertion, AstraZeneca mentioned that the pilot will assist pharmaceutical firms adjust to the Inflation Discount Act’s 340B de-duplication necessities, that are guidelines designed to stop drugmakers from giving duplicate reductions on the identical remedy.
“We consider this pilot program strikes the suitable steadiness between effectivity and oversight, in the end guaranteeing that producers can perform the statutory de-duplication requirement in a dependable and clear method,” the corporate acknowledged.
A Bristol Myers Squibb spokesperson mentioned the pilot will assist advance “a extra accountable and sustainable 340B program” via integrity safeguards and higher information sharing.
Is that this the appropriate repair for 340B?
The nation’s main professional on 340B — Sayeh Nikpay, a professor on the College of Minnesota — didn’t label the rebate mannequin as strictly good or dangerous.
On one hand, she sees the way it may enhance program integrity, which might profit drugmakers and payers.
“The issue is that principally all the opposite worth concessions that producers give out — whether or not these are Medicaid drug rebates or producer rebates that undergo PBMs — these are all post-transaction rebates,” Nikpay mentioned.
She defined that this could create “stacked low cost” points — the place drug producers might inadvertently give out a number of reductions on the identical drug.
Nikpay identified one other integrity downside with the 340B program: because it’s grown, massive hospitals and non-safety internet suppliers have dominated program participation. Initially, Congress meant 340B reductions to assist solely the suppliers that have been serving primarily low-income populations, however now, participation typically extends to any nonprofit hospital, whatever the affected person inhabitants they serve.
Two-thirds of nonprofit hospitals participate in this system, Nikpay acknowledged.
How the brand new rebate system will have an effect on 340B-covered entities is dependent upon the supplier kind, she declared. Primarily, suppliers which might be smaller, rural or take care of a primarily uninsured inhabitants are prone to battle with money movement, however well being programs with extra monetary assets will in all probability take up the shift with minimal disruption.
The 340B program is significant to assist some suppliers guarantee they will ship care to sufferers who in any other case wouldn’t obtain it. However to others, it’s a little bit of a money cow.
For instance, data shows that in 2023, Minnesota suppliers collaborating in 340B garnered at the very least $630 million in earnings, with the overwhelming majority of that income going to bigger well being programs. And that is only for distributed 340B medication — not even counting these administered in an workplace, which account for about half of all 340B drugs.
General, Nikpay thinks there are trade-offs and unintended penalties of the 340B program because it exists right now. She illustrated this with a private instance.
She shouldn’t be a security internet affected person, however her hospital participates in 340B and will get the 340B low cost on her medication. Nonetheless, as a result of that low cost was utilized, her employer’s PBM can not declare a rebate on that very same drug — which reduces the financial savings that would have gone towards reducing her insurance coverage premiums.
“In that case, I’m form of irritated, proper? My employer paid a PBM to convey my drug prices down, and now I’m not benefiting from it as a result of a 340B low cost obtained utilized first — on me, who shouldn’t be a security internet affected person in any respect,” Nikpay defined.
So it’s comprehensible why lawmakers would wish to foster higher program integrity and guarantee 340B reductions are reaching sufferers. Nevertheless it’s unclear if the brand new rebate mannequin is the easiest way to repair this system.
Nikpay thinks the 340B has broader points than simply stacked reductions.
“Producers contribute to excessive drug prices. They’re behaving like a monopolist. But in addition — there’s nearly no market self-discipline on what suppliers cost sufferers and their insurers. And that’s additionally an issue,” she remarked.
Photograph: REB Pictures, Getty Pictures
