Pharma and hospitals will keep testing the bounds of the 340B program until Congress steps in, a University of Southern California (USC) health policy research fellow predicts in a new white paper.

University White Paper on 340B Says Pharma and Hospitals Will Keep Testing 340B’s Bounds Until Congress Acts

Drug manufacturers and hospitals “will likely continue to test the bounds” of the 340B program until Congress passes legislation addressing multiple concerns about it, a University of Southern California (USC) health policy research fellow says in a new white paper.

USC Schaeffer Center for Health Policy & Economics Karen Mulligan says those concerns include 340B duplicate discounts, drug diversion, contract pharmacy, disproportionate share (DSH) hospital eligibility, uncertainty about how hospitals use program savings, and the U.S. Health Resources and Services Administration’s (HRSA) lack of regulatory authority over 340B, all amplified by the program’s “dramatic growth.”

“There are valid concerns with the 340B program related to transparency, diversion, and duplicate discounts, particularly through contract pharmacies and hospitals,” Mulligan says in the paper. “However, the 340B Program has also provided significant resources to many providers and allowed them to better serve millions of patients. Congressional reform efforts will need to take both perspectives into account to sustainably modify the program.”

The USC Schaeffer Center’s advisory board includes nine senior executives from biotechnology manufacturers, three from large health-systems, one from a hospital association, and a number from the insurance industry and think tanks. The center’s Value of Life Sciences Innovation Program has argued against price controls saying they would hamper innovation and could reduce life expectancy over the long term by 3%. 

The paper includes the following note: “The views expressed herein are those of the authors, and do not represent the views of the funders. The Schaeffer Center is supported by a wide variety of public and private entities and donors, including pharmaceutical manufacturers and healthcare providers who participate in the 340B program.”

Mulligan and two colleagues published a statistical analysis in June that they said supports the belief that some hospitals “behave strategically” to boost their Medicare disproportionate share patient percentage to qualify for 340B discounts. It found “an increase in the number of hospitals whose DSH is just above the 340B eligibility cutoff” that the researchers said cannot be explained “by chance alone.”

The study was not designed to identify methods hospitals use to lift their DSH percentages. The researchers said possibilities include deliberate misreporting, admitting more Medicaid or dual eligible patients to raise their DSH percentage, or better patient mix recordkeeping.

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