As a physician dedicated to treating Californians living with inherited bleeding disorders, I cannot overstate the critical importance of the federal 340B Drug Pricing Program for clinics and hospitals that disproportionately care for the uninsured and underinsured.
The 340B Program allows covered entities like hospitals providing “charity care” or nonprofit healthcare providers serving our most vulnerable citizens to buy medications at a significantly discounted price. As a result, the 340B program helps nonprofit clinics and other qualified entities afford to keep the lights on.
Today, various nonprofit and even for-profit hospitals that provide virtually no charity care and cater to the affluent have been designated as 340B “disproportionate share hospitals” supposedly serving large numbers of the uninsured and underinsured. They are then able to benefit from the steep prescription drug discounts.
These large hospital chains now participating in the program are profiting to the tune of millions. Still, nothing prevents these entities from “double-billing” by purchasing medicines at the lower 340B price and billing Medi-Cal, or patients, at the non-discounted price.
A September 2022 analysis by the Community Oncology Alliance revealed that some hospitals participating in 340B price leading oncology medications nearly five times more than the price they paid. Another study found that hospital systems charge an average of 86% more than private clinics for cancer drug infusions.
We saw this happen recently to a patient with advanced prostate cancer. A 340B hospital in Chicago charged the patient $38,398 for a single shot of a cancer infusion when it is likely that the hospital only paid $260. These bad actors are not only driving the cost of care at the expense of patients but also risking the longevity of the 340B program for those underserved centers that need it to survive.
Compared to disproportionate share hospitals, hemophilia treatment centers were pioneers in the 340B world. Unlike hospitals and other providers, these centers must reinvest funds derived from the 340B program into patients’ treatment, services, care coordination, and prescription drug needs — regardless of their ability to pay.
The hemophilia treatment centers plan not only eliminates the risk of double billing, but also quantifies the amount of 340B prescription drug savings and income that are reinvested back into patient programs. Between 2014 and 2016, more than 80% of the services provided to patients within California’s hemophilia treatment centers, at more than $15 million per year, was supported solely by 340B savings.
Without a requirement at the federal level to prevent double-billing or even to report abuse, bad actors will continue to exploit 340B. This exploitation has led to the number of participating entities exploding from 8,100 in 2000 to 50,000 in 2020, despite a decline in the number of uninsured and underinsured patients since the program’s creation in 1992.
340B discounts have increased from about $4 billion annually in 2007-2009 to $38 billion in 2020. Because of this, 340B is now the second largest federal prescription drug program, behind only Medicare Part D.
A promising bright spot of the program’s growth centers around the unique opportunity to reduce health inequities by serving patients in rural or low-income areas, as most disproportionate share hospitals do. Yet, a recent report found that only 38% of 340B hospitals and less than one-third of affiliated sites and contract pharmacies are located in medically underserved areas.
A New York Times exposé of a powerful nonprofit health system in Virginia found that the system, Bon Secours, slashed services at Richmond Community Hospital, an actual 340B entity serving low-income patients, while investing in the city’s wealthier, white neighborhoods. Following the report, Richmond’s mayor sent a letter to HHS Secretary Xavier Becerra asking for an investigation into the “deeply troubling use of section 340B.”
These entities exploiting 340B are doing so to the detriment of the program itself. If this exploitation and expansion continue, it will risk not only the health and well-being of our patients but also the ability of specialty clinics to continue serving vulnerable children and adults throughout the country, resulting in higher healthcare costs to the state and country as patients lose critical medical and social services that are currently keeping them healthy and productive.
Reforms are needed to ensure 340B is helping the patients it is intended to help. Despite calls by the Government Accountability Office to ensure participating entities comply, there have been no regulatory changes to 340B since its inception. Commonsense solutions include adding transparency and accountability requirements to more clearly define a 340B patient, strengthen eligibility standards for qualified entities, and develop policies to prevent duplicate discounts.
There are many of us using this program as intended. We will all suffer if 340B continues down the path it’s on.
Diane Nugent, MD, is the president and founder of the Center for Inherited Blood Disorders, an Orange County-based safety net clinic serving patients with rare, chronic inherited blood disorders.