340B drug pricing debate pits hospitals against doctors against big pharma

Depending on how much the program is reformed, it could mean the difference of hundreds of millions of dollars for the thousands of hospitals who get a drug discount.

As the Obama Administration mulls changes to the federal 340B drug discount program, hospital systems are looking to preserve the current model while independent docs and drug companies lobby for reforms.

This June, the Health Resources and Services Administration will issue guidance on the 23-year-old, $7.2 billion 340B drug discount program for hospitals and outpatient centers. Now under review at the White House Office of Management and Budget, the HRSA guidance is likely to address patient eligibility definitions and contract pharmacy issues. Depending on how far it goes, it could mean the difference of hundreds of millions of dollars for the thousands of hospitals who get a drug discount.

With nearly one-third of hospitals now participating, the 340B program has recently become controversial. Critics maintain that 340B gives hospital systems an unfair advantage over independent practitioners, particularly independent oncologists, by letting hospitals sell 340B drugs to non-qualified patients, as a form of cross-subsidization.

“To the extent that the 340B Drug Pricing Program exists to benefit vulnerable patient populations, there is insufficient evidence to ensure that the program is achieving these objectives to the fullest extent possible,” said the American Society of Clinical Oncology in a policy statement calling for reforms to the program.

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Non-hospital providers have 12 ways qualify for 340B program based on eligibility for other federal funding. Six types of hospitals, including acute care and rural referral centers, can qualify for the 340B program based on whether at least 11.75 percent of their patient mix comes from Medicaid and a calculation of Medicaid inpatient days and Medicare Supplemental Security Income inpatient days.

“There is an emphasis on inpatient stays under this formula, and there is no consideration in the formula regarding whether prescriptions filled under the 340B Drug Pricing Program are for individuals,” argues the ASCO, which wants to replace the DSH formula.

The Health and Human Services Office of the Inspector General also believes there are problems with 340B. The OIG recommends that HRSA issue guidance on the patient definition as it applies to “different prescription-level transactions,” and ensuring that the discounts are actually passed onto low-income patients. The OIG also wants to have HRS address the issue of transparency about “ceiling prices,” so 340B providers and state Medicaid agencies know if they are being charged correctly by drug makers.

The OIG and ASCO both argue that the program’s standards are too ambiguous when it comes to issues like permissible cross-subsidization, the use of contract pharmacies and what kinds of pricing information is available.

Advocate organization America’s Essential Hospitals is opposing any legislative changes proposed in the 21st Century Cures bill that could limit access. That bill, which is still in committee, is taking aim at drug and medical device approvals process.

“We appreciate the willingness of the Energy and Commerce Committee to reach out to stakeholders and make meaningful changes to proposed 340B program legislation. But even with these revisions, we remain deeply concerned this legislation will weaken the program and harm access to affordable medications and health care services for vulnerable patients,” said CEO Bruce Siegel in a statement.

Big Pharma, meanwhile, is also calling for changes to the program, after seeing 340B discounts of as high as 50 percent in some cases eating into their profits. The “current hospital qualification criteria is misaligned with Congress’ goal of supporting vulnerable patient access to prescription medicines,” said John Castellani, CEO of Pharmaceutical Research and Manufacturers of America, last year. Castellani cited a study partly sponsored by PHRMA that found that charity care represents only 1 percent of patient costs for 25 percent of  of 340B hospitals, and that about 20 percent of hospitals account for 80 percent of the charity care at 340B hospitals.

Health systems that have incorporated 340B into their operations dispute the characterization that 340B has been overused.

“The 340B drug pricing program has helped hospitals like ours stretch federal tax dollars to meet the needs of the low-income, uninsured and underinsured populations we serve,” said Ronald Peterson, president of Johns Hopkins Hospital and Health System in Baltimore.

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Peterson, along with leaders of the New York City Health and Hospitals Corporation, Ascension Health and dozens of other providers, sent a letter to lawmakers in the House and Senate urging them to protect the program.

For public and nonprofit hospitals, the 340B program “increase the number of patients we serve and offset losses from  uncompensated care,” Peterson and the other health system executives wrote. “ In some instances, the program allows us t o keep our emergency rooms  and hospital doors open.”

They noted that 340B hospitals generally treated more than twice as many low-income patients as other hospitals and claim nearly twice as much in uncompensated care. The 340B program “helps reduce the high costs of  treating indigent, uninsured and underinsured patients, while expanding access to medications and services at no cost to the government or the public,” they wrote. “If the program were to be restricted, vital  services to the underserved would be cut back. Prescription drug costs for our patients would  rise dramatically and taxpayers would have to pick up the tab.”

Twitter: @AnthonyBrino