Setting the Record Straight on 340B

A new report by the Berkley Research Group (BRG) is the latest attempt by the pharmaceutical industry to disparage a program with a proven track record of helping poor patients and vulnerable communities.

For more than 20 years, the 340B Drug Pricing Program has provided financial relief from high prescription drug costs allowing eligible hospitals to stretch limited federal resources to reduce drug costs and expand health services to patients.

Financed by a group claiming to want reform of the program and supported by the pharmaceutical industry, the report attempts to examine past trends and future projections for the 340B program. But the BRG report relies on questionable data that cannot be replicated, draws incorrect conclusions in a number of areas and does not paint an accurate picture of the 340B program. Below are just a few areas that set the record straight where the report misses the mark.

• Only a small percentage of pharmaceuticals purchased in the U.S. each year are made through the 340B program. The report projects that total sales in the 340B program would increase to more than $16 billion in 2019. While we have serious concerns with these projections (see below), even if it were true, the $16 billion would represent only 4 percent of the projected spending on pharmaceuticals in the U.S. in 2019. Spending on pharmaceuticals is expected to be $381.1 billion in 2019, according to data [i] from the Centers for Medicare & Medicaid Services. 
• Medicare Disproportionate Share Hospitals (DSH) provided more than $25 billion in uncompensated care to patients in 2013[ii]. That is more than three times the total amount of drugs purchased annually through the 340B program in 2013. In addition, the report cites the increase in Medicare DSH hospitals enrolling in 340B as a driver of the program’s growth; however, it fails to mention that 340B hospitals average 3.9 percent operating margins [iii] compared to the 18 percent operating margins [iv] that pharmaceutical companies enjoy. In addition, one out of every three 340B hospitals has a negative operating margin.
• The report uses proprietary data that cannot be validated or replicated. The report uses proprietary data from five pharmaceutical manufacturers representing about 35 percent of the total sales published by Apexus, the prime vendor of the program. Since these are proprietary data, it is unclear if these data are a representative sample of sales. In addition, the study inappropriately extrapolates data on patient encounters for 340B covered entities that are not hospitals or community health centers, and it uses brand pharmaceutical prices, which are much higher than generics, even though the industry has shifted toward using generics.
• Under the Affordable Care Act, hospitals are implementing new and better ways to deliver care that achieve better outcomes for patients. This includes hospitals strengthening ties to each other and to physicians to implement electronic medical records, coordinate care across the entire health care continuum and respond to new payment systems. The report projects that the number of oncology practices acquired by 340B covered entities will increase by 50% in 2016 and 2017. But the study provides no reasonable basis for this estimate, and it is not consistent with the analysis of historical trends.

These are only some of the problems with the report, which adds to a continuing pattern of misinformation about the 340B program being generated by a group financed by the pharmaceutical industry. The fact is that the increasingly high cost of pharmaceuticals makes the program just as relevant now as it was when Congress established it in 1992. Policymakers and the public can learn the real story about how hospitals are using the 340B program to benefit their vulnerable patients and communities by visiting, www.aha.org/protect340B.