340B: Survival Instincts Honed and Battle-Hardened

The federal government may have shut down, but there has been no pause for the 340B drug pricing program. The more than 1,600 safety-net hospitals my association represents are preparing for some of the biggest 340B changes since the program’s inception in 1992. We also have been busy educating lawmakers who have been asking why 340B has grown over those 30-plus years.

Jan. 1 will mark the start of a new year, and also a new process 340B hospitals must use to receive 340B discounts on some of the outpatient drugs they prescribe the most. The Health Resources and Services Administration (HRSA) will begin a pilot program to replace upfront discounts with backend rebates on the 10 drugs subject to Medicare Part D price caps.

The rebates will apply to all uses of the drugs, not just those drugs for Medicare Part D beneficiaries. And while the shutdown has complicated the timing, we expect more information soon about which drugmakers have permission to proceed, and how their rebate models might work.

340B hospitals are busy preparing not only for the administrative burdens of these models, but also the extra financial cost. Requirements to pay full commercial prices for these 10 drugs and file rebate claims after dispensing means that public and nonprofit safety-net hospitals will be floating millions to profitable drug companies with the hopes of receiving rebates soon thereafter. This process will cause these hospitals, which already have low or no operating margins, to divert revenue from patient care. Add to that the implementation of Medicare price caps on those 10 drugs, which will also reduce 340B savings, and hospitals will be financially hit by both the rebate pilot and Medicare price caps, all while trying to navigate these two complex new processes to make sure they receive the correct rebates for drugs and can maintain enough inventory for patients.

Meanwhile, Capitol Hill is still at work amid the shutdown, and that includes a 340B hearing held last week. Senator Bill Cassidy from Louisiana convened his Health, Education, Labor, and Pensions Committee to discuss 340B growth and its impact on patients. The event featured discussion of a Congressional Budget Office (CBO) report from September. And while the CBO found that the biggest contributor to growth in spending on 340B drugs is due to increased drug prices, it also suggests that 340B hospital actions, such as hospital integration with clinics, drug prescribing patterns, and health service expansions, might be contributing to growth – and potentially increasing spending by the federal government.

The CBO, however, overstates much of this growth by misinterpreting federal data on HRSA’s web page regarding hospital clinics. HRSA changed the rules for how hospitals report clinics – from doing so on a per-building basis to requiring reporting of each service at each location as its own separate clinic, dramatically increasing the number of reported 340B clinics practically overnight.

CBO also overlooks peer-reviewed research that found similar prescribing patterns between 340B and non-340B hospitals, after accounting for patient medical status, hospital characteristics, and other factors. CBO notes that federal spending could increase when 340B hospitals use savings to offer more services, subsidize uncompensated care, and provide patient support such as transportation.

But it also acknowledges that such care expansions may improve patients’ health outcomes, which could decrease overall care costs. 340B Health shared these important points with Senate offices ahead of the hearing.

We all know 340B works as Congress intended: to enable safety-net hospitals to serve their patients. And as 340B hospitals head into the complex new landscape that awaits them on Jan. 1, we know that the patient care mission will continue to be their North Star.