340B Facts and Figures

The 340B program requires pharmaceutical firms to give large discounts to hospitals and clinics that serve high volumes of low-income patients.  This sounds like a good idea at first: give money to people who can’t afford their medicines.  However, when one reads the sentence above closely, it becomes clear that patients don’t receive these discounts: hospitals do.  Further, the program would only work if: (i) hospitals serve a homogeneous patient population (e.g., all poor or all rich), and (ii) a hospitlal’s savings from 340B are passed on to lowincome individuals.  Both of these conditions likely do not hold in practice.

In fact, Austin Frakt has a nice summary of the 340B program in his N.Y. Times article a few weeks back titled “A Little-Known Windfall for Some Hospitals, Now Facing Big Cuts“.  Below I highlight some of the literature cited in this article that hopefully can serve as a useful reference.

• The 340B program saved hospitals $6 billion in 2015.  McCaughan (Health Affairs 2017).
• 340B started off as a program to serve the poor, but increasingly funds are being used to help hospitals treating wealthier communities. Conti and Bach (Health Affairs 2014) and Nikpay, Buntin and Conti (JAMA Int Med 2018)
  • “We found that hospital-affiliated clinics that registered for the 340B program in 2004 or later served communities that were wealthier and had higher rates of health insurance compared to communities served by hospitals and clinics that registered for the program before 2004. Our findings support the criticism that the 340B program is being converted from one that serves vulnerable patient populations to one that enriches hospitals and their affiliated clinics.“
• 40% of hospitals participate in 340B. Tribble (Kaiser Health News 2017)
• Profits from 340B have not led to more access to care for low-income patients, or reductions in mortality rates among them. Desai and McWilliams (NEJM 2018)
  • “The 340B Program has been associated with hospital–physician consolidation in hematology–oncology and with more hospital-based administration of parenteral drugs in hematology–oncology and ophthalmology. Financial gains for hospitals have not been associated with clear evidence of expanded care or lower mortality among low-income patients.“
• 340B increases cost by increasing provision of care in-hospital.  Conti and Bach (JAMA 2013).

  • “[First, for] oncologists practicing in 340B-affiliated outpatient clinics, prescribing may shift toward more expensive drugs because profit margins will in general be larger…Second, the 340B program creates a widening disparity between noneligible and eligible hospitals and affiliated oncology practices in the profits they are able to obtain from the care of well-insured patients with cancer.⁷ This disparity is likely underlying trends toward consolidation and affiliations between community-based oncology practices and 340B-eligible hospitals…Third, drug manufacturers will likely seek to increase list prices even further to offset revenue losses incurred as a larger number of drug sales become eligible for 340B discounts (and thus fewer drugs are sold at full price).“

Why the sudden interest in 340B?  Frakt notes a recent policy change:

In January, Medicare lowered the prices it pays for 340B drugs by 27 percent. Although this move chips away at how much hospitals can benefit financially, it does little to address how much insurers and individuals pay for prescription drugs or the value they obtain from them. In addition, the move does nothing to increase hospital spending that could help the poor.

So is 340B likely to stay?  Only time will tell.

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