Contentious debate follows report on higher oncology drug prices at safety-net hospitals
A report suggesting that safety-net hospitals are charging 3.8 times more for oncology drugs has sparked pushback from hospitals,
A report finding that safety-net hospitals are charging 3.8 times more than the purchase price for oncology drugs has sparked pushback from hospitals, which say the report had too small a sample size and did not accurately reflect costs to consumers.
The initial report, by the nonprofit Community Oncology Alliance (COA), noted that the federal system of reporting requirements is complex and evolving—regulators have proposed and enacted a range of price transparency rules for hospitals in recent years, with data-gathering and compliance still problematic in many cases. And the report acknowledges that these safety-net hospitals (known as 340B hospitals) serve a poorer, less-insured population and face competitive challenges.
Related: Provider drug spending: Prices will increase 3% in 2022
However, the COA report said that these hospitals are marking up oncology drugs at rates that are “problematic” because they result in much higher costs than drugs in community oncology practices. “The data presented in this report paints a picture of hospitals pricing drugs aggressively,” the report said.
“The ‘spread’ between the discounted 340B purchase price and the price charged to insurers or patients in 340B hospitals is 3.8 times at the median,” the report said. “Most problematically, 340B hospitals [charge] cash-paying customers the same as the median price of insurers, i.e., 3.8 times their acquisition costs to patients paying cash. In short, to the extent 340B institutions fulfill their mission of providing lower cost care, we are not seeing it reflected in their drug prices.”
Hospitals disagree
Hospital groups quickly contested the findings of the report. The trade group 340B Health released a statement in its blog that called COA an “anti-340B group” and said the report was “highly flawed,” and “inaccurate.”
“The report lacks understanding of how Congress structured 340B,” the blog said. “Lawmakers created the 340B program to allow savings from lower drug costs to support a broad range of services for patients with low incomes… the report fails to consider the many ways 340B hospitals are using the savings to provide uncompensated and unreimbursed care as well as vital services that cost more to deliver than the reimbursements they bring in, including trauma and burn care, HIV care, and inpatient mental health care.”
And a statement from Stacey Huges, executive vice president of the American Hospital Association, cast the issue in terms of providers vs. the drug industry, saying the report: “…Once again tries to obfuscate the issue of sky-rocketing drug prices by choosing to blame hospitals rather than the drug companies who set the prices and enjoy double-digit profits at the expense of patients and the providers who serve them.”
What about insurers?
The COA report did raise the issue of what role insurers play, noting that commercial insurers were aware of the gap between what they are paying 340B providers for oncology drugs and the much lower purchase price, but had not done much to challenge it. The report listed several possible reasons for insurers not taking action, including a weaker negotiating position in this case and the fact that insurers have little incentive to challenge cost increases that are similar for all commercial carriers.
Interestingly, in discussing the insurance industry’s response to this issue, the report also noted the ongoing shift of emphasis to outpatient clinic—rather than hospital—administration of oncology drugs. COA has many board members that represent provider groups with outpatient cancer care facilities. “Insurers are focusing on shifting drug usage to non-hospital settings (either community clinics or specialty pharmacies) rather than attempting to negotiate prices with hospitals,” the report said.
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