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Breaking: MedPAC Staff Unable to Link Higher Drug Spending at 340B Hospitals to Incentives Created by 340B Discounts

Breaking: MedPAC Staff Unable to Link Higher Drug Spending at 340B Hospitals to Incentives Created by 340B Discounts

Medicare Payment Advisory Commission (MedPAC) researchers were “unable to attribute” evidence of higher drug spending at 340B hospitals on two types of cancer “to incentives created by 340B discounts,” the researchers briefed commissioners during a MedPAC meeting in Washington Jan. 17.

The researchers also said 340B’s effects on cancer drug spending “are likely to be idiosyncratic and not generalizable to other cancers or conditions,” and that 340B’s effect on cost sharing for cancer patents “appears to be small, if any,” depending on the patient’s type of cancer and supplemental insurance coverage.

340B hospitals are likely to point to MedPAC’s findings as vindicating their criticism of studies by the Government Accountability Organization (GAO) and others on 340B’s impact on prescription drug spending. The subject has dogged 340B hospitals since 2015, when the GAO found that per beneficiary Medicare Part B drug spending was substantially higher at 340B disproportionate share hospitals than at non-340B hospitals and the Department of Health and Human Services Office of Inspector General found that, in the aggregate, Part B payments to 340B covered entities were 58 percent above 340B ceiling prices. Those findings have become frequent talking points for drug manufacturers and others who want hospital participation in 340B curtailed and a smaller 340B program focused narrowly on indigent and uninsured patients.

340B hospitals say GAO and others who studied the issue inadequately controlled for different patient and institutional characteristics and other factors that might explain why drug spending tends to be higher at 340B hospitals.

Senior Republicans on the House Energy & Commerce Committee asked MedPAC in 2018 to report on whether the availability of 340B drug discounts create incentives for hospitals to choose more expensive products and, if so, what the impact would be on Medicare patients’ cost-sharing for such drugs. They asked MedPAC took look at 340B as part of a broader study of consolidation in the hospital industry. MedPAC Chairman Francis Crosson, M.D., indicated during today’s meeting that the study will be included in the commission’s March report to Congress.

MedPAC’s 340B Analysis

MedPAC’s staff analyzed average drug spending per month on five types of cancer—breast, colorectal, prostate, lung, leukemia and lymphoma—at 340B hospitals, non-340B hospitals, and physician offices. The study encompassed drugs reimbursed under both Medicare Parts B and D and both chemotherapy and supportive drugs. The study covers years 2009 through 2017. The end year is noteworthy because, beginning in 2018, the Trump administration reduced Medicare Part B drug reimbursement for drugs purchased by 340B DSH, free-standing pediatric, and free-standing cancer hospitals from average sales price plus 6 percent to ASP minus 22.5 percent.

Even not accounting for the current nearly 30 percent reduction in Part B drug reimbursement for 340B hospitals, MedPAC’s staff found:

  • Average drug spending by cancer type at 340B hospitals was 2 percent to 5 percent higher than at non-340B hospitals, and ranged from 1 percent lower to 7 percent higher than at physician offices.
  • 340B hospitals are more likely to be larger, to be teaching hospitals, and to serve patients who are younger, disabled, and who qualify for Part D’s low-income subsidy.
  • There is no consistent pattern in cancer drug spending at newly enrolled 340B hospitals relative to other hospitals, suggesting that change in 340B status had no effect.
  • When more patients are treated at 340B hospitals (as measured by 340B hospital market share in metropolitan statistical areas), there is a statistically significant increase in drug spending on two of the five types of cancer studied (prostate and lung). “But we are unable to attribute these findings to incentives created by 340B discounts,” the staff said. It said reasons for higher drug spending at 340B hospitals on lung cancer include “higher price per unit for Part B drugs” and “larger share of patients [receiving] new immune-oncology therapies.” For prostate cancer, it said reasons include “higher price per unit for both Part B and Part D drugs” and “more Part D prescriptions per patient (8.1 vs. 7.5 among non-340B).”

During the question and answer session after the staff presentation, some commissioners asked the staff to add to the report information on topics including 340B drug discounts’ effect on hospital profit margins, the extent to which 340B is responsible for the shift of cancer care from physician offices to hospital outpatient departments, and how Medicaid expansion affected hospital eligibility for 340B. The staff said it would comply.