Do Profits – or Patients – Benefit from 340B Growth?

December 11, 2014

by Amanda Conschafter, blog editor

Under the Affordable Care Act, fewer Americans are now uninsured. So why does the government’s discount drug problem for hospitals treating uninsured patients continue to expand?

A new white paper by Berkeley Research Group reports that the 340B program could cover $16 billion in discounted drugs by 2019. The 340B program, designed for hospitals serving indigent and uninsured patients, allows “disproportionate share” hospitals to purchase medications at reduced prices. Pharmaceutical manufacturers provide the drugs at a discount, though hospitals bill back to insurers at the established price rate. The resulting profits help hospitals that serve a disproportionate share of indigent patients to stay economically viable.

But such anticipated growth is “unsustainable,” says the Alliance for Integrity and Reform of 340B. And questions linger about whether 340B’s drug discounts enable care for needy patients – or generate profits for ambitious hospital systems.

The white paper notes that the number of participating hospitals has increased from 185 to nearly 1,000 in the last decade. One cause is the Medicare Modernization Act of 2003, which changed the calculation to determine disproportionate share in some hospitals. The change prompted hundreds of new hospitals to enroll.

Moreover, some hospitals have multiplied the value of their 340B discount by acquiring satellite clinics. The white paper explains that between 2009 and 2012, hospitals acquired at least 140 oncology clinics – and increased their 340B drug use by roughly 120 percent. Hospitals also have begun to contract with more pharmacies, which help dispense the prescription medications purchased at a reduced cost.

These factors caused significant growth. And that growth looks likely to continue. Medicaid expansion, as well as new 340B eligibility categories introduced by the Affordable Care Act, opens the program to more hospitals.

With such growth comes more opportunities to manipulate the 340B system. Some hospitals profit from the 340B net income but serve largely wealthy or insured patients – who don’t reflect the program’s intent.

Nevertheless, proponents of 340B contend that the program offers vital aid to underserved communities. Critics, however, demand transparency to prove that the discounted drugs serve needy patients – not unscrupulous hospitals seeking fiscal gain.

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