5 Things to Know About 340B

As the date for the comment period on the proposed guidance by HHS on 340B drug pricing draws near, read about the program and its impact on healthcare overall.

The federal 340B Drug Pricing Program, initiated in 1992, requires pharmaceutical manufacturers participating in the Medicaid Drug Rebate Program to negotiate a drug pricing agreement with HHS—the manufacturer will provide specified discounts on “covered outpatient drugs” to government-supported facilities. The program enables covered entities to stretch scarce federal resources as far as possible, reaching more eligible patients and providing more comprehensive services. As the date for the comment period on the proposed guidance by HHS draws near (October 27, 2015), the following information will help provide a better flavor for the program and some of the controversies associated with it.

1. GAO Report Highlights Unlawful Spending By Hospitals Under 340B

A report from the Government Accountability Office (GAO) finds that a program for hospitals that serve high numbers of poor and uninsured patients has created perverse incentives to prescribe more drugs and more expensive drugs, particularly in the area of cancer care. The report found that Medicare Part B spending per beneficiary in 340B hospitals was more than twice that of hospitals outside the program.

2. Oncology Drugs Responsible for Much of the 340B Spending

A study conducted by the Berkeley Research Group and funded by the Community Oncology Alliance points to oncology drugs as the fuel to the rapidly growing fire of 340B. The report found that cancer drugs made up 40% of the Medicare fee-for-service costs pf 340B institutions, which in turn accounted for 58% of all Medicare Part B drug spending in 2013.The period between 2010 and 2013 revealed an explosive growth in cancer drug spending in the 340B sector: Medicare Part B reimbursement rose 123% for oncology drugs in this period, compared with 31% for non-340B hospitals and a 5% decrease for community oncology practices. Medicaid expansion may only exacerbate these trends if there are no changes to the program, according to the report.

3. 340B and Orphan Drugs

A judge recently ruled against the Health Resources and Services Administration (HRSA)’s attempt to include orphan drugs in the 340B drug discount program. While the Affordable Care Act exempts all drugs indicated to treat orphan diseases from discounts under 340B, HRSA mandated a rule back in 2013 that mandated these discounts for the use of orphan drugs outside of their orphan indications. The trade organization PhRMA sued HRSA, which resulted in HRSA releasing a mega-guidance and calling it an interpretive, rather than a legislative rule.

4. Impact of the Proposed Rule Changes to 340B

A new draft guidance by HHS and HRSA, released August 27, 2015, could significantly reduce savings and might involve more rigorous compliance oversight. While HRSA will be accepting comments on these proposed guidelines till October 27, 2015, there is no guarantee that the language of the guidance will be altered. Read an expert evaluation of the rules and their expected impact in The American Journal of Pharmacy Benefits.

5. A Community Practice Oncologist Shares His Opinion on the 340B Program

Bruce J. Gould, MD, medical director of Northwest Georgia Oncology Centers in Marietta, GA, in an interview with The American Journal of Managed Care, said that 340B pricing creates an unleveled playing field for community practices that are pitted against hospitals enrolled in the program. It also impacts patients who have fewer choices with respect to centers of care and may face higher copays, payers encounter higher costs, and this ultimately drives up the cost of healthcare, according to Gould.

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