February 11, 2016
4 min read

Doctors urge Congress to preserve the 340B Drug Pricing Program

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Thousands of physicians from American safety-net hospitals signed a letter sent to Congress highlighting the importance of the 340B Drug Pricing Program.

The letter asks Congress not to consider suggestions from drug industry lobbyists to restrict the impact of the drug program, which makes treatments available to low-income, uninsured and underinsured patients at extreme discounts.

John Sweetenham, MD, PhD

John Sweetenham, MD

More than 4,700 physicians signed the letter, which was addressed to Speaker of the House of Representatives Paul Ryan, R-Wis., House Democratic Leader Nancy Pelosi, D-Calif., Senate Majority Leader Mitch McConnell, R-Ky. and Senate Democratic Leader Harry Reid, D-Nev.

“The drug industry is working hard behind the scenes here in Washington to dismantle the 340B program under the guise of reform,” Ted Slafsky, president and CEO of 340B Health, said during a press briefing held by 340B Health, a membership program of 1,100 hospitals and health systems that participate in the 340B Drug Pricing Program. “Let there be no misunderstanding. Their goal is to shrink or even gut the program. The results would be devastating to health care providers who devote their lives to treat all patients regardless of their ability to pay.”

Program’s impact

The 340B program was created as part of the Veterans Health Care Act of 1992 to allow qualifying health care entities that treat a high number of low-income and uninsured patients to obtain drugs at 20% to 50% discounts. The program is administered by the Health Resources and Service Administration, which is expected to release an omnibus guidance for the program later this year.

“The 340B  program plays a vital role in health care access and cost in the United States,” Robert Chapman, MD, director of the Josephine Ford Cancer Institute at Henry Ford Health System in Detroit, said during the briefing. “Despite Medicaid expansion in our state, Henry Ford continues to see more than $317 million per year in uncompensated care. Our community-based clinics alone generated a loss of $42 million last year. We keep these clinics open despite losing money because patients need care and we find that overall costs are lower when hospitals offer large clinic networks.”

The 2011 Government Accountability Report found that providers within the 340B program do use their benefits to assist the uninsured and underinsured, thus fulfilling the intent of the program.

“The 340B program has always helped health care providers to continue their mission of providing care for all regardless of their ability to pay,” Slafsky said. “It’s never been a patient assistance program. Insured patients get a negotiated rate with the insurance company. It’s necessary to have it this way to have it work effectively.”

The cost of drugs — especially in oncology — make it harder for practices to sustain an inventory of supplies.

“These hospitals are still struggling to survive and are on the brink of bankruptcy and 340B is essential to provide for their care to all,” Slafsky said.

Potential reform

Despite that drug sales within the 340B drug program accounted for only 2.3% of the $329 billion spent on drugs in the U.S. in 2013 — according to data from IMS health — drug companies are pushing for change by lobbying and contributing to political campaigns.

Critics suggest 340B has expanded beyond its intended scope, increasing the costs of insurance and pharmaceuticals while inadvertently providing financial windfalls to eligible hospitals, which can retain the difference between a drug’s discounted price and its market value when the agent is administered to well-insured patients.

In January, the Medicare Payment Advisory Commission (MedPAC) — an advisory board commissioned by Congress in 2015 —  voted 14-3 in favor of a draft recommendation that would cut Part B drug payment rates for hospitals in the 340B program by 10%.

Such a reform would change the criteria to determine who receives the 340B benefit and, thus, how the program works. Further, some doctors believe reform of the 340B program would allow drug companies to raise their prices, with a profit margin between 20% and 30%.

“In my work as an oncologist, I am fortunate enough to see the good that the 340B program does every day,” John Sweetenham, MD, executive medical director of Huntsman Cancer Institute at University of Utah and Chief Medical Editor for hematology of HemOnc Today, said during the briefing. “The message we should send to Congress is very simple, 340B is a lifeline for many of our patients and it must be protected.”

Critics of 340B have also said that the program has created a shift from private oncology practices to hospital settings, because hospitals that participate in 340B often acquire community-based cancer centers to extend their discounts within these sites.

Further, the program has expanded to include more hospitals due to the expansion of Medicaid under the Affordable care Act.

However, 340B has greatly aided small, rural critical-access hospitals that average 25 beds or less, Chapman said.

“You could have 50 of those hospitals enter the program and they would have less impact than the drugs that are purchased with the discounted pricing than my hospital by itself,” he said. “It’s very misleading to talk about the expansion of the program based on the number of hospitals because that growth has been in tiny, rural critical-access hospitals.” – by Anthony SanFilippo


IMS Health. Medicine use and shifting costs of healthcare: A review of the use of medicines in the United States in 2013. Available at: www.imshealth.com/en/thought-leadership/ims-institute/reports/use-of-medicines-in-the-us-2013. Accessed Feb. 11, 2016.

U.S. Government Accountability Office. Drug pricing: Manufacturer discounts in the 340B program offer benefits, but federal oversight needs improvement. Available at: www.gao.gov/products/GAO-11-836. Accessed Feb. 11, 2016.

Disclosure: Sweetenham and Chapman report no relevant financial disclosures. Slafsky reports an employment role with 340B Health.