By Anthony M. DiGiorgio, DO, MHA and Wayne Winegarden, PhD
Enacted by the US Congress in 1992 to help entities serving lower-income and uninsured patients stretch their resources, the 340B Drug Pricing Program mandated drug companies give large discounts to covered entities (CEs). Judging the program on its outcomes, not its intentions, there is growing evidence that the 340B program fails to achieve its primary goal. Giving discounts to entities, rather than to patients, primarily shifts resources from payers and drug companies to large hospital conglomerates. Hospitals have no requirement to disclose which patients receive the drugs and how resale profits are used. A program originally created to assist a small number of hospitals has now exploded, covering thousands of CEs and generating billions of dollars. This growth is fueled by the program design, which allows CEs to keep the difference between a drug’s full costs and the 340B program price discount, which can exceed 50% of list price.
Problematically, the legislation lacks rules about how CEs use their revenue from the program. A 2021 study found no evidence that hospitals entering the 340B program increased their care for underserved populations any more than institutions not participating in the program—the core justification for receiving the discounts.1 Another study showed hospitals exhibit strategic corporate behavior to meet, without exceeding, the minimum share of low-income patients to qualify for the 340B program.2 Further data suggest that participating hospitals devote fewer resources (1.7% of net patient revenues) toward charitable care than the average hospital (2.0%).3
Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.
Reforming 340B to Serve the Interests of Patients, Not Institutions
Pacific Research Institute
By Anthony M. DiGiorgio, DO, MHA and Wayne Winegarden, PhD
Enacted by the US Congress in 1992 to help entities serving lower-income and uninsured patients stretch their resources, the 340B Drug Pricing Program mandated drug companies give large discounts to covered entities (CEs). Judging the program on its outcomes, not its intentions, there is growing evidence that the 340B program fails to achieve its primary goal. Giving discounts to entities, rather than to patients, primarily shifts resources from payers and drug companies to large hospital conglomerates. Hospitals have no requirement to disclose which patients receive the drugs and how resale profits are used. A program originally created to assist a small number of hospitals has now exploded, covering thousands of CEs and generating billions of dollars. This growth is fueled by the program design, which allows CEs to keep the difference between a drug’s full costs and the 340B program price discount, which can exceed 50% of list price.
Problematically, the legislation lacks rules about how CEs use their revenue from the program. A 2021 study found no evidence that hospitals entering the 340B program increased their care for underserved populations any more than institutions not participating in the program—the core justification for receiving the discounts.1 Another study showed hospitals exhibit strategic corporate behavior to meet, without exceeding, the minimum share of low-income patients to qualify for the 340B program.2 Further data suggest that participating hospitals devote fewer resources (1.7% of net patient revenues) toward charitable care than the average hospital (2.0%).3
Click to read the full article in JAMA Network.
Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.