Audit: Doctors are overprescribing drugs to get Medicare cash

Audit: Doctors are overprescribing drugs to get Medicare cash
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A Medicare program designed to offset costs at hospitals serving the poor is likely prompting doctors to over-prescribe drugs to their patients, according to a new federal audit.

Hospitals that participate in Medicare’s 340B Drug Pricing Program are either prescribing more drugs or more expensive drugs to their patients compared to hospitals that don’t qualify for the program, investigators found.


Spending is about $144 per patient at the 340B hospitals — more than twice the $60-per-patient spending at hospitals without the program.

And the differences in treatments could not be “readily explained by hospital characteristics or patients’ health status,” the report finds.

The federal investigators, who are part of the Government Accountability Office, urged Congress to take action because the health officials don't have the power to lower the incentives.

Hospitals are allowed to participate in the 340B program if they treat larger numbers of low-income patients. Those hospitals receive a minimum discount of about 22 percent of the average sales price for drugs, according to a MedPac report.

Spending by 340B hospitals has exploded in the last decade, growing from $500 million in 2004 to about $3.5 billion in 2013.

The program first launched in 1992.

There are major disparities, particularly among major teaching hospitals that are part of the program and those that aren't. The per-person cost is $82, compared to $211 with the drug pricing program.

The financial benefits reaped by hospitals “poses potentially serious consequences to the Medicare program and its beneficiaries,” the Government Accountability Office wrote.

Extra spending is harmful to the Medicare program as a whole in addition to patients, who face larger copays because of the more expensive treatment, according to the report from the Government Accountability Office.

The drug pricing program includes about 40 percent of all U.S. hospitals. It uses a formula that pays hospitals regardless of how much the hospitals paid for the drugs, creating an incentive for hospitals to prescribe their most expensive drugs to maximize revenue from the program.

In their response to the GAO, the Department of Health and Human Services said a higher volume of drugs could be improving patients’ health. 

340B Health, a group representing about 1,000 hospitals across the country, argued that the GAO report does not include enough data to support their claims.

"We believe these findings deserve additional exploration," the group wrote in a statement. "We encourage policymakers to work with 340B stakeholders on this issue to understand the underlying basis for these results and ensure that changes are not made that would undermine this incredibly valuable program."

- This post was updated on Tuesday, July 7 at 1:10 p.m.