The 340B Drug Pricing Program was created in 1992 and permits hospitals and clinics that deal with a big inhabitants of low-income and uninsured sufferers to purchase outpatient pharmaceuticals at a reduction.
It was meant to assist safety-net suppliers and assist them stretch their monetary assets to serve extra weak sufferers. However since its humble beginnings, this system has grown exponentially. Between 2000 and 2020, the variety of lined entity websites taking part in this system grew from 8,100 to 50,000. In 2023, the 340B lined entities bought $66.3 billion in lined outpatient medicine by way of this system, in comparison with $2.4 billion in 2005.
It’s been well-documented that drug corporations have their points with the 340B program. A number of have sued the federal government — together with Johnson & Johnson, Sanofi, Eli Lilly, Bristol Myers Squibb and Novartis — after the Well being Assets and Companies Administration rejected their proposed mannequin for 340B that would supply hospitals retrospective rebates as a substitute of upfront reductions on medicine. Judges have dominated towards the drug corporations in these efforts.
Some lawmakers have additionally focused this system, together with Senator Invoice Cassidy (R-Louisiana), who launched a scathing report on the 340B program in April. The report raised considerations about if this system really advantages low-income and uninsured sufferers.
However there’s one other stakeholder — and one which perhaps doesn’t make all of the headlines — that thinks this system wants change: employers.
A number of employer advocacy organizations, together with the Nationwide Alliance of Healthcare Purchaser Coalitions, argue that the 340B program permits hospitals to “purchase low and promote excessive,” enabling them to buy the drugs at a major low cost and cost sufferers with insurance coverage at full worth.
Whereas they’re in favor of the unique intent of this system, modifications have to be made, employers argue.
“I’ve no drawback with 340B,” mentioned Shawn Gremminger, president and CEO of the Nationwide Alliance of Healthcare Purchaser Coalitions, in an interview. “Now we have no drawback with the truth that we all know that employer cash, successfully, goes into these establishments. Rural hospitals … want the cash. It’s the abuse by very giant, very worthwhile, tax-exempt establishments that I feel wants to vary,” particularly calling out methods like Cedars Sinai and Cleveland Clinic.
How 340B impacts employers
There are a number of methods the 340B program negatively impacts employers, in accordance with Gremminger. One is that when a drug is stuffed by way of the 340B channel as a substitute of by way of the employers’ PBM, the employer loses its rebates (although the rebate system is one cause giant legacy PBMs are held in such poor gentle).
“We predict rebates are silly, and we all know that PBMs maintain on to a whole lot of them. However in the long run, we’re paying a reduced worth, regardless of the negotiated worth is,” he mentioned. “Underneath 340B, that doesn’t occur, as a result of our PBM doesn’t contact it. The affected person goes to the contract pharmacy, fills the script, pays their co-pay, simply as they might anyplace else, however then it form of loops again to the hospital. The hospital is ready to attract down the 340B low cost as income to them, and we’re paying full worth for the drug.”
Because of misplaced rebates, employers lose about $6.6 billion a yr, in accordance with information from the Alliance.
Gremminger’s feedback concerning the 340B program have been echoed by Bret Jackson, president and CEO of the Financial Alliance for Michigan.
“For a few years of this system, it was working as meant, and I feel it’s simply lately the place principally company healthcare has found out tips on how to actually maximize it and reap the benefits of it. … They’re in a position to purchase medicine at a low price, I actually don’t have any drawback with that. The hope is that they’re going to make use of that cash to deal with the group that they’re servicing. However what finally ends up occurring is that they’re charging extra for medicine on the opposite finish to of us like us, and are reaping simply large income from it,” Jackson mentioned.
Gremminger of the Alliance famous that as well as, the 340B program encourages hospital consolidation. Personal observe physicians can’t take part in 340B.
“As quickly as you get purchased by a hospital, they’re in a position to get 340B reductions in your medicine,” he argued. “So significantly within the oncology area, the place the drug worth makes up an enormous a part of the income, there’s a profound incentive for the hospital to need to purchase the oncology observe, and there’s a reasonably robust incentive for the oncology observe to simply develop into a part of a hospital as a result of the physicians get some [revenue] as effectively.”
In truth, greater than 70% of hospital acquisitions from 2016 to 2024 had consumers that have been 340B lined entities, in accordance with Avalere Well being, an advisory agency.
There are additionally “distorted prescribing patterns” in 340B, Gremminger declared. “Your incentive now’s to purchase the costliest drug since you get the most important low cost, prescribe extra of that drug and mark it up extra,” he mentioned. “And the entire proof reveals that that’s precisely what’s occurring.”
A Well being Affairs report discovered that 340B hospitals prescribe biosimilars (that are cheaper than biologics) 23 proportion factors much less usually than non-340B hospitals.
All collectively, this creates a program that’s “costing us billions of {dollars}, and there’s no profit to the employer,” Gremminger charged. “Worse, simply on an ethical stage, there’s actually restricted proof to recommend that this system is definitely working the way in which it was meant,” he added, noting that Cedars Sinai in Beverly Hills is a 340B hospital.
Beverly Hills is a rich neighborhood in Los Angeles with a median family earnings of $127,979.
Jackson and Gremminger each referenced the current report from Senator Cassidy, which discovered that Bon Secours Mercy Well being and Cleveland Clinic, each lined by 340B, generated a whole bunch of tens of millions of {dollars} in 340B income and didn’t go reductions instantly on to sufferers.
Cleveland Clinic advised MedCity Information that the 340B program helps the group save assets that might have been spent buying drugs however can as a substitute be utilized in offering care.
“As well as, the 340B program permits us to proceed caring for sufferers who can’t pay for providers, spend money on our native communities, protect crucial backed well being providers, present continued entry to pharmacies, and provide pharmacy-related advantages to our sufferers,” a spokesperson mentioned. “Cleveland Clinic is the main supplier of Medicaid providers, charity care and psychological well being providers within the State of Ohio, due to this fact serving a big inhabitants of rural sufferers and people with very restricted assets.”
What the hospitals suppose
The American Hospital Affiliation (AHA) advised MedCity Information that the 340B program is a “lifeline” for eligible hospitals, permitting them to broaden entry to care.
The group attributed the expansion of this system to exterior components.
This contains “the choices made by drug corporations to continuously elevate drug costs and introduce new medicine onto the market at record-high costs, with some crucial medicine costing tens of millions of {dollars} to accumulate. As well as, prior Congressional motion to permit rural hospitals, resembling crucial entry hospitals to take part, broader coverage selections to maneuver providers from inpatient to outpatient, and advances in biomedical science which have enabled using specialty medicine rather than different medical interventions have all contributed to progress,” mentioned Bharath Krishnamurthy, director of coverage on the AHA, in an electronic mail.
Krishnamurthy added that drug corporations are spreading misinformation about this system to develop their backside strains, giving the instance of the 340B rebate mannequin that drug corporations are pushing for. As an example, final yr, Johnson & Johnson mentioned it is going to cease offering upfront reductions to disproportionate share hospitals taking part within the 340B program for plaque psoriasis drug Stelara and blood thinner Xarelto. As an alternative, hospitals must buy the drugs at full worth after which submit information to J&J to obtain a rebate later. The AHA is urging HHS to reject this effort.
In the case of the affect of the 340B program on employers, 340B Well being argued throughout a current press name that with out 340B, employers can be paying the identical quantity as they’re now. 340B Well being is a nonprofit representing hospitals and well being methods that take part within the similarly-named drug low cost program.
“What they’re saying is that as a result of hospitals get a reduction on 340B, that low cost needs to be handed on verbatim. And if it’s not, then employers are paying greater than they need to. So what we are saying to that’s that that’s precisely the purpose of 340B. … So saying that it’s costing cash shouldn’t be an correct means of claiming it, as a result of if there was no 340B, they’d be paying the identical costs that they’re paying now,” mentioned Maureen Testoni, 340B Well being president and CEO.
Gremminger countered that this isn’t the case.
“I need to stipulate that we’re not making an attempt to say it shouldn’t be round, but when 340B wasn’t round, we might be paying the negotiated costs that we get by way of our PBMs,” he mentioned. “And once more, there’s an entire different drawback with PBMs and the truth that they’re messing round with issues, however there’s no query that the post-rebate negotiated worth we get is decrease than the completely not negotiated checklist worth that we now have to pay proper now due to 340B.”
A report from the Nationwide Alliance of Healthcare Purchaser Coalitions additionally discovered that industrial costs are about 7% increased at giant 340B hospitals in comparison with giant non-340B hospitals.
The reforms employers need
There are a number of reforms the Alliance wish to see relating to 340B, however most instantly, the group would really like higher transparency.
“How a lot am I dropping as an employer? The place’s that cash going? Who’s getting the cash? … In my thoughts, frankly, we’d like fewer hospitals in this system. Cleveland Clinic doesn’t have to be in 340B. Cedars Sinai doesn’t have to be in 340B,” Gremminger argued.
He added that the scope of this system ought to actually simply be restricted to safety-net suppliers, group well being facilities, rural hospitals and people treating a disproportionate share of low-income sufferers.
Jackson of the Financial Alliance for Michigan added that he needs this system to return to what it was meant for.
“I don’t suppose they need to be charging low and promoting excessive. …. [They should] not be capable of use the income from 340B to purchase extra service strains, to exit and broaden their footprint,” he mentioned. “I feel that needs to be used for affected person care.” He added that the income must also go to labor shortages and paying suppliers more cash.
Picture: cagkansayin, Getty Photographs
