Guess what? The 340B program grew, yet again, hitting a whopping $43.9 billion in sales at the discounted 340B price in 2021. But there has not been evidence of corresponding growth in care provided to vulnerable patients at 340B covered entities. And making matters worse, fresh data show that 340B may actually be driving up costs for some patients and our health care system as whole. The program of today is having the opposite effect of what Congress intended when they created 340B. That’s a problem.
In an updated analysis, Milliman used 2020 data to compare outpatient medicine spending for commercially insured patients among 340B disproportionate share (DSH) hospitals, non-340B DSH hospitals and other non-340B hospitals. Consistent with a previous analysis published in 2018, Milliman found that 340B hospitals have higher per patient outpatient pharmacy costs than their non-340B counterparts. Based on the analysis, a few key observations stand out:
- Among all commercially insured patients receiving outpatient care, meaning those who received medicines and those who did not, average per patient spending on outpatient medicines was more than two and a half times higher at 340B DSH hospitals than non-340B DSH hospitals.
- When looking only at commercially insured patients who received medicines as part of their outpatient care, the difference was even greater. On average, per patient spending was more than three times higher at 340B DSH hospitals.
How are 340B hospitals driving higher spending? Although the Milliman analysis does not consider every possible driver of the differences, the findings suggest a key driver is that these hospitals prescribe patients more expensive medicines. The analysis found that 340B hospitals are using about 10% more prescriptions per patient receiving medicines and the average costs per prescription for a patient was more than 150% greater than the cost per prescription at non-340B hospitals.
The results of this analysis may partially explain why 340B DSH hospitals alone accounted for nearly 80% of all sales at the 340B discounted price in 2021. And because deductibles and coinsurance are typically based on the cost of a patient’s prescriptions, the prescribing patterns identified in the analysis may result in higher cost sharing for some patients and could even drive up premiums for all commercially insured patients.
In addition to these prescribing patterns, other studies have also found 340B creates incentives for more provider consolidation, which drives up health care costs. By acquiring smaller non-340B hospitals or buying up independent physician practices, 340B hospitals can increase the reach of the program and buy more medicines at the discounted 340B price — enabling them to generate even more revenue. CMS recently released a database looking at changes in ownership of hospitals and of the 71 acquisitions that occurred from Q1 2016 through Q1 2022, 73% (52) of buyers were 340B hospitals (in comparison, 340B hospitals make up 57% of all U.S. hospitals).
A new white paper from the FTC adds to alarm bells raised by many studies over the years about the negative consequences of hospital consolidation. In this instance, the FTC looked specifically at hospital mergers facilitated through Certificate of Public Advantage (COPA) laws, or mergers that waive some federal antitrust laws in favor of state government oversight. FTC concluded that several hospital mergers subject to these COPAs have resulted in higher prices and reduced quality of care. Many of the case studies in the paper are in fact 340B hospitals, which is unsurprising considering 340B hospitals are more likely to acquire other hospitals.
When taking a holistic look at our health care system and areas that are impacting patient spending, the 340B program cannot be overlooked. There is clear evidence that prescribing practices of 340B hospitals and market consolidation driven by these same hospitals are contributing to higher patient costs.