The Lynx Group

340B Program

July 2013, Vol 4, No 6

At the Third Annual Conference of the Association for Value-Based Cancer Care, several Meet the Experts roundtable discussions addressed the hottest topics in oncology. TonyZappa, PharmD, MBA, Vice President, Contract Pharmacy Services Operations, Wellpartner, moderated this discussion.

The 340B Drug Pricing Program provides access to drugs at a reduced cost to certain institutions; the program limits the cost of outpatient drugs for hospitals that provide care to a high proportion of indigent patients, or to patients who live in rural or remote areas. Hospitals qualified for the program include:

  • Disproportionate-share hospitals (ie, those treating indigent patients)
  • Children’s hospitals
  • Cancer hospitals exempt from Medicare’s prospective payment system
  • Critical access hospitals
  • Rural clinics
  • Sole community hospitals.

Before the implementation of the Affordable Care Act (ACA), 1200 hospitals qualified for the 340B program. Currently, that number is 2200, and all critical care hospitals automatically qualify.

To date, many hospitals have not established mechanisms to effectively track 340B costs, despite being required to do so. Although the Office of Pharmacy Affairs conducts between 200 and 300 audits annually, no penalties or sanctions are used for noncompliance. Drug manufacturers may request audits for hospitals that are using their products. The implementation of the International Classification of Diseases, Tenth Revision coding will add an additional layer of complexity to tracking these costs.

Participation in the Program
One of the most important factors influencing participation in the 340B program is the expected cost-savings. Participating rural hospitals are larger and are more likely to administer high-cost drugs than hospitals not participating in the program.

Hospitals participating in the program are free to allocate the cost-savings realized from participating in the program in any way they like.

There have been suggestions that hospitals are taking advantage of lax oversight in the program, with unintended consequences. Some contend that Congress should require that hospitals fully disclose how they use their 340B pharmacy profits.

Furthermore, some specialty pharmacies would like to get involved in the 340B program, but it may not be worth it for big specialty pharmacies, because 340B drugs are a fairly small percentage of the overall US drug spending.

Unintended Consequences

According to one provision in the ACA, orphan drugs are excluded from new hospitals that are qualified for the 340B program. This provision has the unintended consequence of disproportionately affecting children’s hospitals, which tend to prescribe more orphan drugs than other hospitals.  

The expansion of the Medicaid program may add 300 new hospitals that are qualifying for the 340B program.

Hospitals can change their business structure to become eligible for the 340B program. For example, it can be argued that some hospital systems are buying rural clinics and other facilities so that the entire hospital system qualifies for 340B pricing. Under the proximity clause, however, a provider-owned clinic must be within 30 miles of the parent hospital to qualify for the program. In the case of integrated health systems, not all hospitals will necessarily apply for the program, even if they are owned by the same health system.

There are no statutes limiting hospitals from buying satellite locations or transferring ownership to draw in more provider-owned clinics.

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