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Which 340B Entities Are Getting Most of the Savings?

Lori Reilly   |     March 19, 2015   |   SHARE THIS

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When policymakers think about the 340B program, they often think of the thousands of clinics that depend on the 340B program to help underserved populations. The 340B program requires pharmaceutical manufacturers to provide these clinics and other qualifying entities with medicines at steep discounts.

While grantees are often seen as the face of the 340B program, data shows grantees actually account for just a small share of the overall volume of drug sales in the 340B program. Instead, the program is largely benefiting hospitals that qualify for the program on the basis of their disproportionate share hospital (DSH) percentage, a measure relating to the number of Medicaid and low-income Medicare patients treated on an inpatient basis. These hospitals represent just 9 percent of 340B entities but are responsible for 81 percent of 340B sales volume.

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The fact that DSH hospitals are the driving force behind the 340B program raises important questions about whether the program is serving its original goal of improving access to medicines for vulnerable or uninsured patients. Federally qualified health centers, Ryan White Program grantees, hemophilia treatment centers, family planning clinics and other grantees participating in 340B typically serve a vulnerable population, identified by an income-based, sliding-fee scale, and must reinvest resources into services for those populations. Hospitals, however, do not have this requirement. In many cases, hospitals qualifying for 340B provide minimal charity care.[1] And further, recent evidence suggests that hospitals are more likely to not pass along 340B discounts to patients compared to grantees.[2] 

About a third of all hospitals now qualify for the 340B program and more hospitals are likely to become eligible for the program due to changes in the health care system. Increases in Medicaid enrollment due to the Affordable Care Act will make more hospitals eligible for 340B through their DSH percentage. At the same time, hospitals are buying up physician practices to enable formerly independent physician practices to gain access to 340B discounts in the community setting.  All the while, it is unclear if patients are seeing any benefits from hospital participation in this safety net program.

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The lack of requirements on hospitals to use 340B discounts to improve access to medicines, combined with data showing that hospitals are the primary beneficiaries of the program, raises questions about whether the program is really serving the patients it was intended to benefit. Congress should revisit the rules governing the program to ensure that only true safety net hospitals qualify and that they use 340B discounts to improve access to medicines for vulnerable or uninsured patients.

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[1] Alliance for Integrity and Reform of 340B, "Unfulfilled Expectations: An analysis of charity care provided by 340B hospitals," Spring 2014 (Available at: http://340breform.org/userfiles/Final%20AIR%20340B%20Charity%20Care%20Paper.pdf)

[2] Department of Health and Human Services Office of Inspector General, "Memorandum Report: Contract Pharmacy Arrangements in the 340B Program," February 2014 (Available at: https://oig.hhs.gov/oei/reports/oei-05-13-00431.pdf)

Lori Reilly

Lori Reilly Lori M. Reilly is Chief Operating Officer, providing executive level management, leadership and strategic direction at the Pharmaceutical Research and Manufacturers of America (PhRMA). In this role, Ms. Reilly oversees PhRMA’s Advocacy activities, including its federal, state, and international government affairs and alliance development work. Ms. Reilly provides strategic leadership and works across PhRMA to develop and advocate for practical policy solutions that will lower costs for patients. Ms. Reilly, named by the Hill as a top lobbyist in 2018, has a long record of working with members of Congress on a bipartisan basis and collaborating with stakeholders across the health care industry. Ms. Reilly is a frequent presenter on industry-related issues, including testifying before Congress on multiple occasions. Ms. Reilly has nearly two decades of experience at PhRMA; prior to her current role, Ms. Reilly was the Executive Vice President of Policy, Research, and Membership at PhRMA, leading the development and implementation of legislative, regulatory, and political strategies to advance policies that encourage patient access and medical innovation. She has also served as counsel at the U.S. House of Representatives Committee on Commerce and was Counsel to a member of the House Ways and Means Committee. Ms. Reilly received a B.A. in Political Science from the University of Nebraska-Lincoln where she graduated with Honors, and a J.D. from the University of Nebraska College of Law. She is currently resides in Alexandria, Virginia with her husband and their four children.

Topics: Patients, Affordable Care Act, 340B, Medicare, Medicaid, Hospitals, 340B Spotlight

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