A recent analysis of the federal government's 340B drug discount program suggests that eligibility is too broad and that lawmakers need to tighten it, which may mean that hundreds of hospitals currently in the program would be booted out.
According to the Alliance for Integrity and Reform of 340B (AIR 340B) analysis, more than two-thirds of hospitals that receive 340B drug discounts provide less charity care as a percent of patient costs than the national average for all hospitals, including for-profit hospitals which do not qualify for 340B under current eligibility criteria.
The analysis also found that for approximately a quarter (24 percent) of 340B hospitals, charity care represents 1 percent or less of the hospitals' total patient costs, and approximately one-fifth (22 percent) of 340B hospitals provide 80 percent of all charity care delivered by 340B disproportionate share hospitals.
"340B is a valuable program, but it doesn't always work the way Congress intended," said Stephanie Silverman, an AIR 340B spokesperson.
Overly-broad eligibility criteria for hospitals have led to an explosion in the number of hospitals that have come into the 340B program, Silverman said. According to Silverman, one-third of all hospitals in the country participate in the 340B program and get 340B discounts with that number expected to grow without an effort to tighten eligibility requirements. Drug purchases through the 340B program will almost double, from $6 billion in 2010 to $13.4 billion by 2016.
"If the program keeps going in this direction, it may not be able to be sustained," she said. She recommends that Congress revise the program's eligibility criteria to specifically target those safety net hospitals providing improved access to prescription medications for the uninsured and the most vulnerable patients in the outpatient setting.
"(The program) should remain in the hospitals in which it was intended for. Any program that overgrows its mission begins to raise scrutiny. When you see overgrowth or the potential for abuse, it creates red flags in a policy sense and we don't want the program to stop."
Silverman added that hospitals that don't fit the criteria for 340B, yet still provide a lot of uncompensated care, resulting in bad debt, should not be able to use uncompensated care costs as a reason for why they may be eligible for 340B.
"We don't want a policy conversation about 340B to be sidetracked by the costs of uncompensated care," she said. "We have to look at 340B in terms of real charity care. It's not about bad debt, it's about serving the uninsured or indigent population."
Pharmacy benefit managers and insurers have taken notice of the increasing use of 340B drugs by their beneficiaries and are responding with limits on reimbursements and/or rebate exemptions for 340B drugs in contracts and agreements, as consultant Ryan Liabenow, CEO of the Kavanah Group, noted last fall.
Pharmaceutical manufacturers also have the legal right to audit the handling and dispensing of 340B drugs by 340B covered entities, and some, such as Amgen, have stepped up their efforts, Liabenow said.