A study released last week by the Berkeley Research Group (BRG) draws a troubling picture of how the 340B drug discount program – created to ensure that medically underserved patients have access to hospital outpatient drugs – not only is benefiting hospitals more than the patients themselves, but in fact may also be driving some hospitals to make business decisions solely in the interest of maximizing financial returns. Both Congress and regulators have an opportunity to put the program back on the right track.
Under the 340B program created by Congress in 1992, patients served by safety-net providers are supposed to benefit from savings associated with steep discounts on outpatient drugs.  But recent trends show that the discounts may actually end up in hospital coffers; 340B hospitals are not statutorily required to pass discounts along to needy patients.  The BRG analysis shows the revenue hospitals can achieve through 340B are so enticing that hospitals may look for more ways to gain. One way is by acquiring community cancer care facilities and getting 340B credit for the medicines these acquired facilities provide.
This trend means that cancer care for our nation’s neediest patients may be compromised to serve the business goals of some hospitals.
The new study shows that this pattern is occurring at increasingly alarming rates, not surprisingly because hospitals are eager to find new ways to generate revenue.  The study, “Trends in 340B Covered Entity Acquisitions of Physician-based Oncology Practices,” demonstrates that, when such acquisitions occur, a great deal of new money starts flowing to the acquiring hospitals, perhaps more troublingly at levels that exceed the amount of charity care they’re providing to their patients.

Another recent study, this one by independent public health care research firm IMS Institute for Healthcare Informatics, looked at the same trend; economists found that the macro-effect of hospital acquisitions of community cancer facilities is a significant side-effect of hospitals’ desire to capture more 340B revenues, and that ultimately this phenomenon increases the cost of cancer care for patients.

Taken together with recent news stories of soaring profits at safety-net hospitals, which are at the same time reducing the charity care provided to patients, these studies call into question whether the 340B program is really meeting the goals Congress set when creating the program.

The 340B program was designed as a vital tool for safety-net providers to enable them to serve needy patients.  Some hospitals are doing what Congress intended, and providing significant levels of charity care in their communities.  But there are still many other hospitals – as the new data tell us – using the program as a financial planning tool, raising the cost of care for some of the most vulnerable patients, and for the healthcare system overall.

The 340B program has great merit, but has fallen off the rails. It is time for a wholesale reevaluation of 340B – for Congress to carefully reexamine eligibility criteria and for federal policymakers generally to hold hospitals accountable for adhering to the program’s original goals. Policymakers and stakeholders alike, including hospitals that remain fully committed to the initial aims of 340B, must responsibly reform the program so that it remains viable to serve the patients who most need it.

Silverman is spokeswoman for the Alliance for Integrity and Reform of 340B.