A new report calls attention to spending in a federal program that requires drugmakers to give discounts to nonprofit hospitals and clinics that treat a large proportion of low-income and uninsured patients.
On Sept. 9, the nonpartisan Congressional Budget Office (CBO) released a report finding that spending on the 340B program grew an average of 19% annually, ballooning from $6.6 billion in 2010 to $43.9 billion in 2021, according to data from 90% of 50,000 participating facilities.
The report only covered data through 2021, but 340B covered entities purchased a record $66.3 billion in drugs in 2023, per the latest data available from the Health Resources and Services Administration (HRSA).
Providers such as community health centers argue these drug discounts keep them afloat and allow them to pass savings to their low-income patients, Healthcare Brew previously reported. But drug companies and lawmakers have pushed for reforms, arguing the program has grown far beyond its intended purpose and some health systems may be abusing it for profit.
What gives? About one-third of that growth can be attributed to increased prescriptions of pricey specialty drugs and rising drug costs (spending on brand-name drugs grew an annual average of 4%), the report found.
The CBO thinks the remaining two-thirds can be pinned on three things: the Affordable Care Act, which expanded participation; a 2010 change in guidance that allowed hospitals to contract with more than one off-site pharmacy; and hospitals’ purchase and integration of off-site clinics.
“The largest” of those three factors is the integration of hospitals and off-site clinics like infusion centers or specialty medicine practices, CBO said. When a hospital acquires an outside clinic, the clinic can start purchasing drugs at 340B prices.
The number of off-site clinics in the program increased from 6,100 in 2013 to 27,700 in 2021, and the share of hospitals with off-site clinics increased from 50% to 76%, according to the CBO report.
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A 2022 New York Times article pointed to nonprofit hospital chains that built satellite clinics in wealthy neighborhoods. The clinics got hefty drug discounts but were miles away from the qualifying 340B hospital.
“In CBO’s assessment, the 340B program encourages behaviors—including the prescription of more and higher-priced drugs, the expansion of services, and the integration of hospitals and offsite clinics—that tend to increase federal spending,” the report reads.
A 2022 analysis in JAMA Network Open found, however, there wasn’t a statistically significant difference between Medicare Part B drug spending between 340B hospitals and others when controlling for differences like patient demographics.
340B fans push back. Maureen Testoni, president and CEO of lobbyist group 340B Health, pointed out the CBO’s report itself says evidence is “limited,” and critiqued its methodology.
The report “did not assess the potential costs to the government or taxpayers if 340B were reduced or eliminated,” Testoni told us via email.
Aimee Kuhlman, VP of advocacy and grassroots for the American Hospital Association (AHA), told us the report “doesn’t provide the full picture.” The program “has remained a small share of drug company revenues and has expanded access, allowing more patients to get the care they need when they need it.”
AHA research found the discounts equated to only 7% of drug companies’ US revenues in 2022.
The report comes about a month after the HRSA opened up applications for a pilot program in which, rather than just paying the discounted price, hospitals would pay the full price up front and receive a rebate from manufacturers afterward.