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Reforming the 340B Program to Put Drug Discounts in Patient Hands
J Clin Pathways. 2021;7(9):20.
The 340B Drug Discount Program is in trouble. Not financially—purchases under the program reached $38 billion in 2020, a 27% increase from 2019 alone. No, the 340B program is in trouble because it is not helping those who it was created to help: vulnerable patients who might not normally have access to lifesaving drugs. A new report, commissioned by the Community Oncology Alliance (COA) and conducted by Aharon “Ronny” Gal of Moto Bioadvisors, indicates hospitals participating in the program are pocketing the discounts obtained in the program rather than directing the funds to help patients in need.
On January 1, 2021, a price transparency rule went into effect requiring hospitals to publish a “machine-readable” file containing prices for all “items and services” provided by the hospital to patients, for which the hospital has established a standard charge. The COA report attempted to analyze the data for oncology drugs and determine the effects of the 340B program on uninsured and cash-paying patients. We found the majority of hospitals were not in compliance with the price transparency rule, with only 123 of the 1087 acute care 340B hospitals publishing the full set of data as required by law.
Within the available data, we found that hospitals are marking up drugs acquired through the 340B program by 3.8 times their acquisition cost when charging commercially insured patients. These markups do not translate to lower prices for uninsured or cash-paying patients. Report data indicates hospitals are charging these patients roughly the same price as the median commercial price (1.02 times), meaning these patients are also being charged 3.8 times the cost of acquiring the drugs. Doing so explicitly violates the 340B mandate to provide care for the less fortunate.
A stunning example of the discrepancy between law and reality is the pricing of the drug Darzalex, an infused drug that is used to treat multiple myeloma (MM). A community oncology practice treating a Medicare patient for one year for MM would purchase the drug at $116,876 and be reimbursed $123,889, making $7013. Conversely, a 340B hospital treating a Medicare patient for one year for MM would purchase the drug for $76,320 and be reimbursed $90,579, making $14,259. The price discrepancy becomes even more apparent when looking at commercial patients. The 340B hospital would purchase Darzalex for $76,320 and charge the insurer a median price of 3.8 times that, or $290,016, for a profit of $213,696. According to all available data, patients who are uninsured or paying cash would be charged the same amount as the insured patient, reflecting the cash cow that 340B has become for hospitals.
The current structure of the 340B program may also discourage hospitals from adopting new, cheaper versions of drugs. When looking at the adoption rate of biosimilars, lower-cost versions of innovative biologic cancer drugs, we found that many hospitals don’t even carry biosimilars, with 25% to 56% of hospitals listing prices for only the innovator product. Essentially none of them carry all available biosimilars. Given that hospitals stand to make more money by using the higher-cost biologic drug, it makes sense that they would not integrate biosimilars into their available treatment options.
It is important to note that no one, not even drug manufacturers, oppose the existence of the 340B Drug Discount Program. No patient should have to settle for less effective treatment because the best option is out of their price range, and the 340B program was created to make sure no one fell through the cracks. However, many parties, COA included, oppose the current structure of the program that allows hospitals to profit off the backs of patients in need.
Change, in the form of a clearly defined objective and oversight that ensures discounts end up where they belong, is desperately needed. One proposal would have discounts follow patients rather than be attached to hospitals. As Congress adapts to its new pecking order after the November elections, expect more action from COA on the 340B program. Patients, especially those with cancer, deserve better than the current system. It is vitally important that the 340B program be reformed to ensure that patients, not hospitals, are reaping the benefits.
