340B Program Growth Is Unsustainable, in Need of Reform

As stakeholders come together at the upcoming fourth annual National Leadership Summit on the 340B Drug Discount Program, now is the time to take a closer look at whether this program is meeting its intended purpose. It is time to revisit hospital eligibility criteria for the program to ensure the program benefits vulnerable or uninsured patients. We should also safeguard the ability of entities truly serving needy patients to continue doing so.

Congress created the 340B program in 1992 to help vulnerable, uninsured patients gain better access to prescription medicines. However, since its inception, the 340B program has grown exponentially and unsustainably, and the latest study from the Alliance for Integrity and Reform of 340B (AIR340B) projects that it will continue to grow at an unprecedented rate over the next five years.

Analyzing the data on total drug purchases through 340B, the study found that by 2021, the program is expected to spend $23 billion at the 340B sales price in total drug purchases. This would be higher than Medicare Part B current spending on drug reimbursements. The study also shows that the 340B program doubled in size from 2010 to 2015 and expanded by an additional 66 percent between 2013 and 2015 alone.

Additionally, despite the growth of the program and the increase in drug purchases, there is little evidence that patients are actually benefiting from this rapid expansion. Instead, increases are caused by things like physician practice acquisitions and unregulated contract pharmacy utilization. As 340B-participating hospitals acquire independent physician practices, we see an increase in health care costs for patients, as treatment shifts from physician’s offices to more complex and costly hospital outpatient departments, which often have higher reimbursement rates.

Low rates of charity care and the growing number of contract pharmacies located outside of underserved communities also contribute to the growth of the program, with contract pharmacy utilization operating in a largely unregulated environment and surpassing six billion dollars by 2021. These changes are driving up health care costs for patients in need without providing any tangible benefits.

In addition to its own unsustainability, the study also found the growth of the 340B program could impact broader industry trends. From 2010 to 2015, 340B hospitals have grown from accounting for 13 percent of Medicare Part B drug reimbursement in 2010 to 25 percent by 2015. This growth is due in part to new hospitals enrolling in the 340B program, but also due to expanded drug purchasing at existing 340B hospitals. As more patients are shifted from their physician’s offices to higher-cost outpatient departments at hospitals, a larger percentage of drug purchases could go through the highly discounted 340B channel. This could lead to higher drug costs for the health care system across the board.

Though well-intentioned and serving as an important safety net for vulnerable patients, the 340B program has certainly strayed away from its original intent. Years of unchecked growth, combined with a lack of oversight, have resulted in unsustainable growth. There is no better time than now to make essential changes to the 340B program so it targets true safety-net hospitals and upholds its commitment to patients in need.


Stephane Silverman is a spokeswoman for the Alliance for Integrity and Reform of 340B.

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