Part 4: Dr James Robinson on the Impact of 340B Programs and Drug Pricing Policies

In the January issue of The New England Journal of Medicine, using 2020 to 2021 Blue Cross Blue Shield data, James Robinson, PhD, MPH, and his fellow investigators published their findings from an analysis of how insurer drug expenditures on infused drugs for patients who have cancer, an inflammatory disease, or a blood-cell deficiency disorder influenced price markups at hospitals and how the share of insurer drug expenditures retained differed among 340B Drug Pricing Program–eligible hospitals and ineligible hospitals vs independent physician practices.

In this final part of our interview with Robinson, he underscores the need for employer education about the health plans they are offering to their employees—specifically, the potential for excessive service costs—fostering managed competition among hospital systems to drive down costs, and innovation in financing drug development.

Transcript

How should self-insured employers respond to these findings?

This is another example of where employers are paying for a lot of very bizarre economic outcomes in health care. So the first thing we could say is, “Well, employers need to be educated about this.” Honestly, I think that if any employer that hasn't figured out that they're not paying double when they go to hospitals for stuff, I don't know where they’ve been. That's not news. Drugs, surgery, radiology, what have you. So I think it's a variety of strategies; some of them have to do with channeling patients to nonhospital settings, some of it has to do with trying to be more selective as to which hospitals and which hospital systems. Ideally, we would have a little bit of managed competition, where different hospital systems competed against each other to get patients and ensure business by moderating their prices or by offering services that they had compensated for in some meaningful way.

We're in this strange moment in the US health care system where there's a stream of studies, including this study, which document the inefficiencies and the pricing irrationalities, and the gouging, if I may use that language, and yet it just goes on and on. And there seems to be very little appetite for doing anything about it, given how volatile the situation is. In some sense, we're waiting for some entities on the purchasing side of the market to come up with a strategy that works. I personally hope that that strategy is something different than just charging more cost sharing to the patient.

How could your findings affect the affordability and accessibility of medications for younger patients?

In principle, prices charged by drug companies for their drugs should go for 2 purposes. First is to cover the costs of manufacturing and distributing those drugs, and then everything above that is potentially available for investment in R&D [research and development] for the next generation of drugs for you and your friends that want drugs. And the more that the revenue from today's drugs, which never makes it to the drug companies, goes to the hospitals, the less investment there is in new drugs. I do believe that we are entering a phase where we can no longer take R&D investment for granted, because it's really getting squeezed. This is one way it's getting squeezed. Through Medicare negotiations, it's getting squeezed. Through PBM [pharmacy benefits manager] rebates, it's getting squeezed.

Everywhere you look, the era of easy pricing from an industry perspective is really coming to an end. So if we want to sustain investment and innovation for the next generation of drugs, the next generation of people, we have to find a way to do that. And the old way, that worked pretty well for many years, is now reaching its senility. It's not working well anymore. We need to figure out a better way of financing innovation.

What we see on the hospital drug side is also happening on the PBM side. All the middlemen are absorbing so much of insurance spending. When we talk about drug spending, we're actually talking about spending for drugs and for drug intermediaries—it’s about 50/50. And just even that concept, I think is a good one to keep in our in our heads.