The fight is heating up in the push to reform the federal 340B drug discount program to reduce the out-of-pocket costs to Medicare enrollees and other participants. The pharmaceutical industry is now weighing in on rising out-of-pocket costs due to 340B hospitals shifting patients to more expensive sites of care.
An analysis of Medicare Fee-for-Service claims data by the Berkeley Research Group shows a substantial shift in site of care for outpatient drug therapies from the physician office to the 340B hospital outpatient setting from 2008 to 2015, according to the report, "Site of Care Shift for Physician-Administered Drug Therapies," commissioned by the Pharmaceutical Research and Manufacturers of America.
For breast cancer and multiple myeloma medicines, about 33 percent of all Part B sales were at 340B hospitals by 2015, compared to 11 or 12 percent in 2008. About 19 percent of the rheumatoid arthritis drug sales through Part B were to 340B hospitals in 2015, compared to 6 percent in 2008.
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Berkeley Research Group contends that the shift is due to 340B hospitals buying independent physician offices – which are not eligible for discounts under the federal program – and then converting them to hospital outpatient departments so they can receive the 340B discounts – even though many of these community-based practices are in wealthier areas and also treat commercially insured patients. The authors cite a 2016 Magellan Rx Management study, which concluded that the hospital outpatient setting is typically the highest-cost setting for administration of medical benefit drugs.
"Because of lax program rules and no requirement that hospitals use any profit from the program to help patients, 340B hospitals are able to bill both insured and uninsured patients at a higher price and pocket the difference between the reimbursement amount and the 340B discounted price," the authors write.
While the Bipartisan Budget Act of 2015 changed reimbursement rates for certain off-campus outpatient departments, Congress last year granted an exemption for mid-build sites that allows more sites to be paid under the more generous Hospital Outpatient Prospective Payment System (HOPPS). Moreover, the Centers for Medicare & Medicaid Services in July introduced a proposed "HOPPS Rule" that seeks to reduce by almost 27 percent Medicare Part B reimbursement on drugs purchased at the 340B price.
However, these two measures are limited to traditional Medicare beneficiaries — reimbursement for Medicare Advantage, Medicaid, and commercially insured patients is not directly affected by these measures.
"Based on the limited scope of these measures and the significant margin potential on 340B purchased drugs, we believe the 340B program will continue to create incentives for consolidation," the authors write. "The site of care for drug therapies like those we analyzed will likely continue to become more concentrated in the higher-cost hospital outpatient setting due in part to incentives from the 340B program."
Stephen J. Ubl, president and chief executive of the Pharmaceutical Research and Manufacturers of America says that the report shows how the 340B program is "benefiting hospitals at the expense of patients."
"One of our top priorities is fixing this broken program," Ubl says. "We encourage Congress and the Administration to reform the 340B program to help ensure it targets the patients and true safety-net facilities it was intended to help."
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Katie Kuehner-Hebert
Katie Kuehner-Hebert is a freelance writer based in Running Springs, Calif. She has more than three decades of journalism experience, with particular expertise in employee benefits and other human resource topics.
