Inequities of 340B Drug Pricing Program May Last Despite Rising Concern

Tony Hagen @oncobiz
Published: Sunday, May 03, 2015
Dr. Gina Villani

Gina Villani, MD

Frustration is mounting with a federal program that was originally designed to allow hospitals that care for underserved people to purchase outpatient drugs at discounted prices. Just ask Dr Gina Villani, an oncologist in Harlem, New York City. Eighty-five percent of her patients are insured through Medicaid, but her clinic does not qualify for 30B Drug Pricing Program discounts. It is owned by Memorial Sloan Kettering (MSK) which, as an institution, doesn’t meet the 11.75% Medicaid patient requirement. As a result, Villani’s Ralph Lauren Center for Cancer Care and Prevention relies heavily on charity to subsidize the cost of treatment.

“If you want to take care of the poor, then you have to go beg people to help you out, and we’re not getting the benefits other places are getting,” Villani says.

Villani is among the population of physicians who feel that the 340B program, created in 1992, needs an overhaul, particularly in order to better serve the indigent and underinsured patients for whom it was intended. A loose definition of which patients are eligible is widely blamed for the extension of program benefits to populations who don’t need them.

A House Energy & Commerce Subcommittee on Health hearing in March on the apparent abuse of the program and the need to institute reforms has fueled hopes that the will to institute change is rising in Washington, DC. Officials from various government agencies reviewed audit information on the program and discussed the shortcomings of efforts to reform 340B. Hearing participants also heard about forthcoming guidance on how the 340B program should operate in future for better results.

“I think the hearing indicates that Congress is waking up to the very serious need for possible change in the program,” says Stephanie Silverman, spokeswoman for the Alliance for Integrity and Reform of AIR 340B, a consortium of oncologists, healthcare companies, and drug manufacturers. “There is a lot of pent-up interest across the ranks of the subcommittee for getting to what’s ailing the 340B program.”

Numerous Deficiencies and Inequities

In the testimony March 24, an official with the Office of Inspector General (OIG) in the Department of Health and Human Services identified numerous inefficiencies and inequities in the 340B program.1 Assistant Inspector General for Evaluations Ann Maxwell said that in many cases 340B program participants have not passed along savings to their disadvantaged patients. In addition, Maxwell said, a lack of transparency in drug billing and manufacturer pricing has caused widespread inconsistency in the discounts that are applied to purchases, owing to regulatory provisions that have prevented the free flow of information that was intended to be shared.

“Without access to ceiling prices, 340B providers cannot ensure that they are being charged the appropriate amount by drug manufacturers. OIG’s work has shown that 340B providers have, in fact, been overcharged for 340B-purchased drugs in the past: we found that 14% of drug purchases under the 340B program in June 2005 exceeded applicable ceiling prices. As a result, 340B providers overpaid by a total of $3.9 million during that month,” Maxwell said.1

In order to ensure proper compensation under the 340B program, states have been forced to do costly payment audits to compensate for the lack of information on ceiling prices, she said.

Maxwell also expressed concern about the rise of contract pharmacies, which have expanded rapidly and are handling an increasing share of 340B prescription business. These pharmacies make their determination about patient eligibility at the drugstore counter rather than at the doctor’s office, Maxwell said, and having no way of knowing who is eligible when the prescription is filled, make their determinations later. Each has its own system for making those determinations, he explained, and there is wide variation, some of which could be construed as “diversion” of 340B funds to unacceptable uses.

Exponential Growth of Contract Pharmacies

Meanwhile, growth of the contract pharmacy sector has been exponential. In a 2014 report, the OIG stated that the percentage of 340B providers that use contract pharmacies had risen to 22% from 10% in 20102 and that the number of “unique” pharmacies serving as 340B contract pharmacies had grown by 770%.

Another flaw in the 340B design is that there is no stipulation for how savings from the program must be used, meaning entities are not required to pass those savings along to patients, Maxwell said. Patients who ought to receive discounts sometimes end up paying full price at the pharmacy, she said, either out of pocket or through their insurers.


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