Transparency and Consolidation Issues Hamper 340B Program in Cancer Care

Since it's implementation in 1992, the aim of the 340B Drug Pricing Program has been to offer low-income and underserved patient populations with cancer and other diseases expanded access to affordable medications by selling drugs at discounted prices to eligible centers.1 However, a lack of clarity among these centers has contributed to the program not operating at the peak of its potential in recent years, according to Aaron Ambrad, MD.

“We believe there is a lot of money sitting on the table [in terms of] 340B
reform, with some estimates up to [approximately] $84 billion in potential savings,” Ambrad, a radiation oncologist at Ironwood Cancer & Research Centers in Scottsdale, Arizona, and a member of the Community Oncology Alliance (COA) board of directors, said in an interview with OncologyLive. The American Hospital Association relies on the 340B program significantly; [however], we believe there are a lot of abuses [of the program]. They say that it’s a good program and it is doing what it’s intended to do. We believe it’s doing a lot more than it was intended to do, which is padding the pockets of these hospitals.”

Participation in the 340B program has experienced significant growth since its inception. There were approximately 1000 covered entities in 1992; in 2021 this figure was over 50,000; 60% were hospitals and 40% were federal grantee clinics.1 More than 40% of US hospitals now participate in the 340B program. The discounted prices offered by the program are equivalent to the average manufacturer price minus the average Medicaid rebate for a unit of that drug during the previous quarter, conferring a discount of approximately 20% to 50% for participating hospitals.

Beyond the rapid growth of the program, research has shown that the patient populations served by 340B program member hospitals have also shifted over time. Findings from a retrospective study published in JAMA Internal Medicine showed that before 2004 participating hospitals were larger (439 beds vs 338 beds), more often public (51.4% vs 11.0%), academic (67.9% vs 18.2%), located in counties with lower income levels (18.0% vs 15.0%), and serving higher levels of uninsured patients (14.0% vs 12.0%) compared with hospitals who joined the program after 2004.2

Increased participation in the program has led to increased profits for centers. Findings from a cross-sectional descriptive study of 340B revenue from Medicare spanning 2013 to 2016 demonstrated that hospitals received approximately $2.1 billion in revenue from Medicare in 2013 and $3.7 billion in 2016.3 The 2016 median per-hospital profits from the 340B program were estimated to be $0.8 million (IQR, $0.1 million-$2.8 million). Data from another study estimated that the 340B program generated more than $40 billion in total profits for covered entities, contract pharmacies, and potentially patients via reduced drug prices.4

Ambrad says the deviation from the program’s intended purpose by participating centers is largely due to a lack of transparency regarding profits and the rapid consolidation of smaller clinics by larger health care systems.

“Our biggest contention is that [health care center] consolidation is what happened with 340B. Over the past 10 years, [340B] hospitals started buying up rural programs, and there is a whole transparency issue of whether this is being policed and whether the oversight is there [to ensure] they are using 340B in the way it was intended,” Ambrad explained.

From 2016 through 2022, research showed that among 52 unique hospitals that were sold and 49 unique hospitals that bought another hospital, 81.6% of buying hospitals were 340B-covered entities.5 This consolidation shifts care delivery from community-based practices to hospital outpatient sites, potentially increasing the cost of care for patients. Importantly, similar consolidation has also been reported in terms of non-340B hospitals and oncology practices, so its precise association with the program has yet to be clearly defined.1

This consolidation of smaller centers into larger hospital systems and the funneling of care into hospitals have led to unintended downstream effects, according to Ambrad. Hospitals represent the most expensive part of the health care system and often provide no additional services for the average patient that can’t be performed by a community practice, he said. In addition, there are often fees charged in the hospital setting that do not accompany care in the community setting, he said.

“The discount [that hospitals] get with the 340B program is supposed to only apply to indigent care. An 11.75% [share of patients receiving indigent care] is required, which amounts to approximately 27% of your patients being on Medicaid or uninsured,” Ambrad said. “We believe that they’re funneling this benefit to all the hospitals. One hospital buys all [of a] drug for the whole system at a discount, which is totally unfair, with discounts up to 50% [leading to] huge markups. There needs to be reform and more oversight transparency. There apparently are no rules as to what they can do with this money that they’re saving; they’re supposed to give it back to the patient, but that apparently is not the case.”

Findings from a 2022 COA study showed that self-reported pricing
data from 340B hospitals revealed that top oncology drugs were priced
at a median of 4.9 times higher compared with their 340B acquisition costs, with the lowest median markup being 3.2 times for tisagenlecleucel (Kymriah) and the highest being 11.3 times for fulvestrant (Faslodex).6 The median markup between biosimilars and their reference products was approximately 5.5 times higher.

Ambrad and other investigators are hoping that legislative action can be taken to increase the transparency of member institutions of the 340B program. In May 2024, US Representatives Earl L. “Buddy” Carter (R, Georgia); Larry Bucshon, MD, (R, Indiana); and Diana Harshbarger (R, Tennessee) introduced the 340B Affording Care for Communities and Ensuring a Strong Safety-Net Act (340B ACCESS Act).7 The bill aims to establish oversight and transparency concerning the 340B program and provide practical and achievable solutions to ensure the program works as intended. The bill calls for the establishment of patient affordability requirements, codifying of patient definition, recognition of contract pharmacies, imposing of hospital eligibility, establishment of child site eligibility, and restriction of pharmacy benefit managers and for-profit entities.

“There has been a lot of bipartisan movement, [and we are] getting the ear [of legislators] to listen to exactly what we believe the main issues [with the 340B program] are,” Ambrad said. “We’re trying to get the senators to understand [our problems with the program], but lobbying

is always a big issue. There are real-world effects on a community practice such as ours, and [these issues] start to destroy the independent, physician-run practice.

References

1. Knox RP, Wang J, Feldman WB, Kesselheim AS, Sarpatwari A. Outcomes of the 340B drug pricing program: a scoping review. JAMA Health Forum. 2023;4(11):e233716. doi:10.1001/ jamahealthforum.2023.3716
2. Nikpay S, Buntin M, Conti RM. Diversity of participants in the 340B drug pricing program for US hospitals. JAMA Intern Med. 2018;178(8):1124-1127. doi:10.1001/jamainternmed.2018.2015
3. Conti RM, Nikpay SS, Buntin MB. Revenues and profits from Medicare patients in hospitals participating in the 340B drug discount program, 2013-2016. JAMA Netw Open. 2019;2(10):e1914141. doi:10.1001/jamanetworkopen.2019.14141
4. Masia N. 340B drug pricing program: analysis reveals $40 billion in profits in 2019. AIR 340B Alliance for Integrity & Reform. Accessed November 4, 2024. bit.ly/4fXSNLw
5. Characteristics of hospitals undergoing mergers and acquisitions. Avalere. February 13, 2023. Accessed November 4, 2024. bit.ly/3ZAUEA9
6. Examining 340B hospital price transparency, drug profits, and incentives. Community Oncology Alliance. September 2022. Accessed November 4, 2024. bit.ly/3CXcPay
7. Carter, Buschon, and Harshbarger introduce legislation to ensure access and transparency in 340B drug pricing program. News release. Buddy Carter. May 28, 2024. Accessed November 1, 2024. bit.ly/4ikpnZB