- A Medicare Payment Advisory Commission study found spending on cancer drugs at hospitals participating in the 340B drug discount program was only 2% to 5% higher than non-340B hospitals and 1% to 7% higher than physician offices. The overall effect of the controversial program on cost-sharing for patients is “likely to be small, if any,” the Congressional advisory group said.
- Researchers were careful to point out they couldn’t directly attribute the spike in costs to incentives created by 340B discounts, noting another potential explanation is that 340B hospitals are more likely to be large teaching hospitals and care for outsized numbers of young and disabled patients who require aggressive treatment and receive subsidies in Medicare’s prescription drug benefit.
- The findings, described as “inconclusive” by one MedPAC member, throw cold water on big pharma’s perennial complaint that the program, established in 1992 to lower drug prices for safety net hospitals, is a major driver of healthcare spending.
Hospitals participating in the 340B program can buy outpatient drugs at substantial discounts, using the average sales price of the drug minus a rebate that changes based on inflation and whether the drug is branded or generic.
Empirical evidence on 340B, which gives participating hospitals on average a 25% to 50% discount on medicines, is limited. House Committee on Energy and Commerce Chairman Frank Pallone, D-N.J., asked MedPAC to dig into the drug discount program’s effect on healthcare spending in 2018. Its initial findings made public Friday provides some new ammunition in the ongoing battle between pharmaceutical companies and nonprofit disproportionate share hospitals over the future of 340B.
Eligible hospitals say they need the program in order to stay afloat, and that big pharma loathes it because it nibbles away at profits. Pharmaceutical companies riposte 340B pads hospitals’ bottoms lines, trickling down to higher costs for patients.
MedPAC’s analysis, one of the few from a non-pharma or non-provider funded angle, looked at monthly average cancer drug spending in 340B hospitals, non-340B hospitals and physician offices across five types of cancer: breast, colorectal, prostate, lung, leukemia and lymphoma.
Higher spending at 340B hospitals seems to be linked to the specific form of cancer. The 340B program was associated with higher spending for just two of the five cancer types studied: prostate and lung, MedPAC researchers found. However, the effects of general increases in oncology spending from 2009 to 2017 and patient age both had large statistically significant effects on cancer spend.
Lung cancer, which accounts for one-fourth of cancer deaths, usually has a higher price per unit for drugs in Medicare Part B, and a larger swath of the patient population is likely to receive new, pricey immuno-oncology drugs if treated in 340B hospitals. Prostate cancer also has a higher price per unit in both Medicare Part B and Part D, and patients are prescribed more drugs in 340B hospitals than non-340B facilities.
However, none of those findings were directly attributable to incentives created by discounts in the 340B program, researchers cautioned, and can’t be generalized to other cancers or conditions, deflating the drug lobby’s common attack that 340B incentivizes hospitals to choose higher priced drugs and use more drugs to inflate their margins.
“These results are a little surprising because they’re not that strong,” Lawrence Casalino, a MedPAC member and health policy chief at the Weill Cornell Department of Healthcare Policy and Research, said at the group’s Friday meeting, while Oschsner Health System CEO Warner Thomas shrugged them off as “modest” and “somewhat inconclusive.”
Powerful trade group PhRMA has been actively trying to shift public opinion on 340B through a barrage of reports and studies over the past few years.
A PhRMA-commissioned late last year argued safety net hospitals in the program were reimbursed for physician-administered drugs at three times higher than what they paid, and another found the program costs patients more in the long run by moving care away from physician offices to more expensive hospital outpatient settings. Some lawmakers have been similarly concerned about price and lack of government oversight or transparency, inciting MedPAC’s inquiry into 340B.
Friday’s report looked at the program prior to 2018, when CMS drastically overhauled payments in the program. Instead of hospitals receiving a drug’s average sales price plus 6%, they were paid 22.5% less than the average price. The facelift immediately sparked a legal challenge that was litigated for much of last year, with renewed fervor after CMS decided to continue the cuts going into 2020 despite a previous court ruling striking them down.
The case is now in the D.C. Circuit, with a decision expected this summer.
Commissioners asked Friday for more information on how consolidation and other environmental trends, like Medicaid expansion, contributed to the spread of 340B. “Is there any other consolidation that preceded this status? Are hospitals seeing it as a windfall” and buying 340B facilities to participate, asked MedPAC commissioner and University of Pennsylvania Health Transformation Director Amol Navathe.
Despite the hullabaloo, advocates for 340B maintain its benefits for low-income patients and their providers outweigh any drawbacks.
The program saved hospitals $11.8 million in 2018, according to trade group 340B Health, which said 90% of those savings was used for patient care services. A strong majority of hospitals said losing those savings would stop them from being able to provide programs like pharmacy services and transportations, with rural hospitals arguing it would contribute to hospital closures, worsening care access in needy areas.
