Hospitals participating in the federal 340B drug discount pricing program are getting reimbursed by payers three times the amount they initially paid for brand medicines – but there's no requirement for them to demonstrate the additional revenue is going toward helping vulnerable people, according to an analysis conducted by Milliman, commissioned by the Pharmaceutical Research and Manufacturers of America.

The 340B program, created by Congress in 1992, is meant to give drug discounts to "safety net facilities" and other qualifying hospitals so uninsured and other vulnerable patients can get access to prescription medicines at discounted rates, the authors write in the white paper. While clinics that receive federal grants are typically required to use revenue from 340B to provide care to vulnerable communities, reinvest any additional resources into services for vulnerable patients and meet reporting requirements on use of 340B revenue, similar requirements do not apply to 340B hospitals.

Milliman's analysis of claims data found that while 340B hospitals on average pay $1,591 per claim for a brand medicine, on average they get reimbursed $4,673 by a commercial insurer. There's no requirement for them to show evidence that the $3,082 in additional revenue was used for the program's intended purpose, the authors write.

"In order to lower patients' out-of-pocket costs, we must address misaligned incentives in the health care system, like the 340B program, that enable hospitals and others in the supply chain to profit without any assurances that patients see any benefit," PhRMA's president and CEO Stephen J. Ubl says in a press release announcing the publication of the white paper.

Indeed, the group's director of public affairs, Nicole Longo, in May blogged that uncompensated care rate declined by $8.4 billion between 2013 and 2017, according to American Hospital Association data. Meanwhile, 340B program sales reached a record $24.3 billion in 2018.

"It is clear that far too many hospitals are taking advantage of a program meant to improve care provided to low-income, vulnerable patients," Ubl says. "This is fueling provider consolidation, incentivizing physicians to prescribe more expensive medicines and shifting care to more expensive settings – all of which impact costs for patients and the broader health care system. We must take steps to get this program back on track."

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