Study: 340B program doesn't cause drug price increases

Though drug costs are on the rise, discounts offered through the 340B program are an unlikely factor, according to a new study.

340B Health, a group that includes 1,300 hospitals in the drug discount program from across the country and advocates for organizations in the 340B program, commissioned a study (PDF) on the financial impacts of the program and found that the 340B discount accounts for just 1% of the drug market.

The total discount was $6.1 billion in 2015, 78% less than what drug makers spend on marketing and 89% less than rebates provided to payers and pharmacy benefit managers, according to an overview (PDF) of the report. 340B discounts accounted for 3.6% of total drug discounts and rebates.

A third of the total 340B discount is part of a penalty against drug makers who either increase the cost of drugs faster than the rate of inflation or who offer discounts lower than the 340B price. Pharmaceutical companies could avoid these penalties by not raising drug costs at high rates, the study concluded.

The Centers for Medicare & Medicaid Services last week proposed significant cuts to the 340B program’s payment rates, suggesting that it could pay providers 22.5% less than average sales price for some drugs. The current 340B rate is 6% above the average sales price.

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340B Health released a second study (PDF) simultaneously, polling its members on how the drug discount program impacts they way they care for low-income patients. Of those that participated in the study, all said that losing access to a contract pharmacy would impair how they care for poor and rural patients.

“[The studies] show 340B discounts aren’t burdening drug manufacturers, aren’t pulling from taxpayer dollars or shifting costs to other payers, and are generating funds hospitals desperately need to cover unreimbursed costs, provide services to low-income and rural patients, and, in some cases, keep their doors open,” 340B Health CEO Ted Slafsky said in an announcement.

Disproportionate share hospitals in particular used the benefits to support uncompensated care costs. Rural hospitals, many of which are already cash-strapped, to reach patients in remote regions.

As lawmakers continue to debate health reform, Slafsky said they should avoid “cutting a hole in the strongest safety net for patients in our urban and rural communities.”