Report Provides an Update on the 340B Drug Pricing Program

Following a report earlier this year examining Medicare Part B spending by 340B institutions, the Berkeley Research Group (BRG) has released an update that provides additional details on the Medicare Part B outpatient drug spend of 340B hospitals, growth in the program, growth in Part B oncology drug spend at 340B hospitals, and reimbursement from Medicare for Part B oncology drugs 340B hospitals and community practices.

Authored by Aaron Vandervelde from BRG, the study used data from Medicare fee-for-service (FFS) hospital outpatient claims, Medicare FFS physician office claims, hospital cost reports, and data from Office of Pharmacy Affairs. The new analysis found an increase in Medicare Part B hospital outpatient drug reimbursement in 2014 compared with 2013: it was 61% in 2014 and 58% in 2013. There was also an increase in the overall spend on oncology drugs, which touched 62% in 2014, up from 40% in 2013 as reported in BRG’s previous report.

What are the primary determinants of this rapid growth in drug spend in these institutions? The report points to both, newly enrolled 340B entities and expansion in the hospital outpatient services of existing 340B entities, as being responsible. BRG found that hospitals that had enrolled in the 340B program in 2010 contributed 26% of Medicare’s Part B drug spend in 2014. The outpatient revenue of disproportionate share hospitals (DSH) also saw an increase over a 4-year period since 2010, although the number of DSH hospitals did not see a big change.

Part B reimbursement for oncology drugs for 340B hospitals increased further in 2014 compared with 2013, from 160% from 123%. However, physician offices saw a 4% reduction in this reimbursement.

The report also found a significant discrepancy in Part B oncology drug reimbursement per beneficiary per day between 340B hospitals versus community practices.

Reiterating the idea of reforming the 340B program, a suggestion that has been put forth by diverse stakeholders, the report concludes that the program will continue to expand, with shift in the site of care from the physician’s office to the hospital outpatient setting being a big contributor. “This has significant cost implications for patients and payers due to the higher per-beneficiary per-day reimbursements when patients are treated in hospital outpatient departments versus physician offices,” Vandervelde writes.

"BRG's update to their analysis of 340B growth in hospitals documents that the drug discount program is increasing the cost of cancer care to seniors and Medicare. Cancer care is over 50 percent more expensive in 340B hospitals than in independent community cancer clinics." said Ted Okon, executive director of the Community Oncology Alliance, in an e-mail, in response to the report's findings.

Randy Barrett, spokesperson for 340B Health, disagrees. Mr Barrett said in an e-mail, "We know 340B hospitals treat more low-income patients and provide more uncompensated care than non-340B hospitals and provide more specialized services that are costly and often not profitable. Safety-net hospitals also treat a poorer and sicker population. We continue to review the Medicare Part B numbers and believe erroneous conclusions are being drawn."