Myths vs. Facts: 340B Revisited
340B is unquestionably in need of reform.
Myth #1: 340B Doesn’t Cost Taxpayers Any Money
Fact: The 340B program drives up drug prices for everyone. A recent IQVIA study shows that state employee health plans paid around $1 billion in 340B uncharges a year on prescription drugs alone (doesn’t include drugs administered directly by a doctor). A new report from the Congressional Budget Office (CBO) details three ways the 340B program also increases drug costs in the federal budget. By encouraging market trends like vertical integration, incentivizing physicians to prescribe more drugs and more expensive drugs, and considering the impact of lost rebates, the 340 program is costing Americans billions.
A study published in the New England Journal of Medicine found that price markups at 340B covered entities were more than six times higher than those at independent physician practices; and a report from North Carolina’s State Treasurer found that “340B hospitals in that state billed the state employee health plan an average markup of 5.4 times their acquisition cost for oncology drugs—84.8% higher than the average markup among non-340B hospitals.”
Myth #2: Drug Manufacturers bear the costs of 340B.
Fact: 340B costs patients at the pharmacy counter. The recent IQVIA study found that “patients incur an out-of-pocket overcharge whenever their cost sharing—either a copay, coinsurance, or a deductible collected at the pharmacy counter—is higher than the 340B acquisition price for the drug, meaning the patient paid more for a drug than their 340B provider paid for the same drug.” Patients are also paying for 340B indirectly through the elimination of rebates and discounts. The CBO report found 340B drugs are often excluded from drug rebates, meaning employers, states, and patients are paying higher prices for drugs that would otherwise be heavily discounted through rebates. The IQVIA report showed that drug costs for self-insured employers and their workers were 12% higher than they otherwise would have been without the 340B program. The CBO report, along with the other evidence, makes it clear that in the end, it isn’t just drug manufacturers who are bearing the cost of the 340B program—it is all of us.
Myth #3: 340B helps a small number of safety net hospitals and benefits patients in underinsured areas.
Fact: Studies have found little correlation between the growth in 340B contract pharmacies and uninsured rates, poverty rates, or medical underservice. Covered entities, especially those qualifying in later years, are actually more likely to serve wealthier populations. A JAMA study of contract pharmacies found that the percentage of pharmacies in the lowest income neighborhoods declined by 5.6%, while non-340B pharmacies in the same area increased by 1.3%. A similar study in the state of Texas found 340B contract pharmacies were located in areas that were significantly less vulnerable than the covered entities with which the contract.
Conclusion: 340B is unquestionably in need of reform. This New York Times expose takes a look at how large hospital chains are taking advantage of a program meant to help the most vulnerable among us, and the direct effect it is having on patients struggling to pay for their healthcare. It is essential for policymakers to take a hard look at the 340B program and evaluate how much hospitals and other covered entities are profiting from the program and where that money is going. That’s why ALEC supports our 340B Transparency and Accountability model. It allows legislators to get the data they need to ensure the 340B program is functioning as it was intended and that 340B profits are actually going to benefit patients.