340B Drug Pricing Program: Serving Vulnerable Patients or Enriching Hospitals?

Victoria Stern, MA


December 02, 2014

In This Article

David Peace, MD, has worked at the University of Illinois at Chicago in the Division of Hematology/Oncology for close to two decades, treating a socioeconomic and ethnically diverse population of cancer patients, two thirds of whom lack adequate health insurance.

The main reason that Dr Peace is able to care for so many insured and underinsured patients is because his hospital participates in a drug discount government program, known as the 340B Drug Pricing Program, which provides eligible entities with steep reductions on outpatient prescription drugs.

"Managing a diverse population is a challenge to begin with, and when you add on financial issues that often prevail in these families it becomes even more of a challenge," said Dr Peace. "But because of 340B, we don't have to turn patients away when they can't pay."

The 340B Drug Pricing Program, established in 1992 by Congress, provides a financial safety net for eligible hospitals and clinics, such as the University of Illinois at Chicago, that care for a large percentage of poor, indigent patients. Specifically, 340B-eligible entities are able to purchase prescription drugs delivered in the outpatient setting at steep discounts of 20% to 50%, which helps them cover financial losses incurred while providing free or low-cost care to their uninsured or underinsured patients.

"The 340B program allows funds to come back to our institution that otherwise wouldn't have been there, and helps us maintain the viability of the oncology program," Dr Peace said. "340B has been a lifeline to institutions like ours because the bulk of our patients wouldn't be able to obtain costly cancer treatments otherwise."

340B has been a lifeline to institutions like ours because the bulk of our patients wouldn't be able to obtain costly cancer treatments otherwise."

Although the program covers a broad range of prescription drugs, it is especially important for cancer care, as the cost of cancer drugs has skyrocketed in the past few years. In the past decade, the price tag for new anticancer agents has increased from about $4500 to $10,000 per month, with 11 of 12 new cancer drugs approved by the US Food and Drug Administration in 2012 costing more than $100,000 per year.[1,2]

"Given the escalating prices of cancer drugs, 340B is an essential program that provides needed coverage to safety-net hospitals," said Hagop Kantarjian, MD, chair of and a professor in the Department of Leukemia at the University of Texas MD Anderson Cancer Center in Houston. "Without 340B, most of these hospitals and clinics would go broke, leaving many needy patients without access to affordable care."

Despite the need for this safety-net assistance, concerns have emerged in the past few years that the 340B program has grown too large. Between 2001 and 2011, the total number of covered entities almost doubled, from 8605 to 16,572.[3] As of July 2014, 2138 hospitals participated in the program, which encompasses just over 35% of all hospitals in the United States. Additionally, discounts from 340B increased from $1 billion to $6 billion between 2003 and 2010.

It's unclear, however, whether many of these newly eligible institutions are using revenues from 340B drug discounts to help needy patients. One report from the healthcare advisory firm Avalere Health found that a minority of 340B-eligible hospitals today (20%) appear to shoulder the bulk of the charity care (80%) delivered by all eligible hospitals, and that 69% of covered hospitals provide charity care rates below the 3.3% national average for all hospitals.[4] Perhaps most worrying, however, is a 2014 report from the Office of Inspector General that uncovered many eligible entities that are failing to pass on 340B discounts to their uninsured patients.[5]

"Such findings suggest a need to re-examine policy around a program that was intended to enhance services for medically indigent patients," Peter Yu, MD, president of the American Society of Clinical Oncology (ASCO) and director of Cancer Research at Palo Alto Medical Foundation, told Medscape. "Given the integral role that drug therapies often play in cancer treatment, we are concerned that access to life-extending, life-saving treatments for low-income patients will not be expanded because the program does not require that added revenues be allocated to outpatient clinics serving this population."


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