Unpacking Past, Future Hurdles in 340B Drug Pricing

In a session on the 340B drug pricing program presented at this year's Asembia Specialty Pharmacy Summit, Tim Paine, principal consultant at Blue Fin Group, outlined how the program came to be, where it stands now at age 30, and what the future might hold for it.

The program was first established in 1992 and allows participating hospitals to manufacture discounts on drugs used in an outpatient setting. In other words, it was designed based on qualifications for inpatient metrics, but for an outpatient benefit, Paine said.

In the years since its inception, debates have centered on whether savings actually benefit the underserved as intended, while numerous court cases have shaped its current interpretation.

In 1992, “health systems, looking face to face with uninsured or underinsured patients, were having to care for them by recently enacted legislation and found themselves in dire financial straits,” Paine explained.

Offering his take on the program, Paine noted that throughout his career he’s witnessed both sides of the debate—having been employed by both a pharmacy and a manufacturer.

“The organic growth that's occurred in [the pharmacy] industry over time, that's really had a tremendous bearing on this program as we know it,” Paine said. In addition to growth in the pharmaceutical industry, the increasing number of players in the 340B program—from payers, to pharmacy benefit managers (PBMs) to health systems—has all added to the complexity of 340B in 2022, he added.

Following previous iterations enacted prior to 2010, the passage of the Affordable Care Act (ACA) “turbocharged” the 340B program which expanded eligibility for covered entities. “Now you're seeing increased qualification. You're seeing more parties involved that can qualify and you're seeing more outlets for them to serve patients in that direction,” Paine said.

With regard to inpatient vs outpatient revenue growth, data show today, the 2 are measured at about 1 to 1, but in 1992 for every $3 in the inpatient spend, there was only $1 in the outpatient spend. Furthermore, the latest data show the 340B program exhibits no signs of slowing down or plateauing.

The ACA also compounded contract pharmacy growth, further convoluting the maze of players a drug has to travel before it reaches the patient. Changes in alignment (ie, verticle integration) between groups also complicates this process.

Although health systems are now working with an increased number of contract pharmacies, this phenomenon isn’t necessarily due to pharmacies serving specialty items. “The specialty drugs are what's driving the dollar volume, not, per se, the number of pharmacies nor the number of scripts,” he said.

But increased integration between pharmacies and health systems does have benefits as this can help improve the patient experience. Contract pharmacies are “an extension of the covered entity to provide them with access in a convenient sort of fashion,” Paine explained.

In his opinion, the program will still be around in another 10 years. If this program were to change, “it would take us straight back to 1992,” he said, when health systems were facing financial struggles from treating uninsured patients.

Currently, that gap is being filled, and the government “is not going to have an appetite to change that because they're not the one filling it.”

With regard to HRSA and their challenges with the administrative dispute resolution process, Paine feels it will be resolved in the future. Along the road to 40, he expects aggressive lobbying from both manufacturers and hospitals on the program, but “the manufacturers in the space have a lot to lose as far as what could happen next,” due largely in part to potential negative publicity.

The perception of what’s happening with the program will “bear inordinately on one party,” he cautioned, and the challenges outlined in the talk won’t reach the level of national conversation until they directly affect patients.

Citing potential examples of local hospitals with outpatient clinics shutting down, Paine explained how it will be easy for the lay public, the media, and the government to point the finger at manufacturers when prices increase and access shrinks.

Increasing education on 340B, creating proactive portfolio management with an eye on 340B, and working to establish common ground between the health system and manufacturers are all steps that may help mitigate negative outcomes.

“By finding a unilateral answer, which was the government deciding it for the health systems, we found ourselves in a lot of messes here. So let's try to work on something together,” Paine concluded.