New Data Show 340B Hospitals Are Reimbursed on Average Three Times What They Pay for Medicines

WASHINGTON, Dec. 17, 2019 /PRNewswire/ -- Hospitals participating in the 340B drug pricing program are reimbursed for physician-administered medicines at a rate that is on average three times what they paid to acquire the medicine, according to a new analysis conducted by Milliman and commissioned by the Pharmaceutical Research and Manufacturers of America (PhRMA). The findings of this new analysis build on existing evidence from the New England Journal of Medicine and the Government Accountability Office, raising further questions on how hospitals are using the 340B program and whether financial incentives are aligned to the program's intent to support care provided to vulnerable or uninsured patients.

Using actual claims data, Milliman estimated the difference between a hospital's acquisition cost for physician-administered medicines purchased at the 340B discount and the reimbursement received from commercial insurers for those medicines. The analysis found 340B hospitals pay, on average, $1,591 per claim for a brand medicine, then submit a claim to a commercial insurer and receive $4,673 as reimbursement. That's a difference of $3,082 between what they paid and what they are reimbursed that the 340B hospital retains – twice what the hospital pays to purchase the medicine.

Other research has found that the amount hospitals – 340B and non-340B – receive after negotiations with commercial payers is, on average, almost two and half times what they paid to acquire the medicine. This new analysis shows 340B hospitals can capture an even larger spread between the discounted 340B acquisition price and the reimbursement they receive from commercial payers.

"In order to lower patients' out-of-pocket costs, we must address misaligned incentives in the health care system, like the 340B program, that enable hospitals and others in the supply chain to profit without any assurances that patients see any benefit," said Stephen J. Ubl, president and chief executive officer of PhRMA.

Through the 340B program, certain qualifying hospitals and federal grantees like community health centers receive, on average, a 25 to 50% discount on medicines to help them provide care to vulnerable or uninsured patients in the outpatient setting. However, there is little to no evidence participating hospitals are using what they save through the program to provide improved care to patients. In fact, hospitals' uncompensated care rate declined by $8.4 billion between 2013 and 2017. Meanwhile, 340B program sales reached a record $24.3 billion in 2018. While participating federal grantees are required under their grants to report to the government how they are using 340B revenue to help their patients, no such requirements exist for hospitals.

"It is clear that far too many hospitals are taking advantage of a program meant to improve care provided to low-income, vulnerable patients," continued Ubl. "This is fueling provider consolidation, incentivizing physicians to prescribe more expensive medicines and shifting care to more expensive settings – all of which impact costs for patients and the broader health care system. We must take steps to get this program back on track."

To learn more about the 340B program and ways it could be fixed, visit PhRMA.org/340B.

To read the full report, "Analysis of 340B Hospitals' Outpatient Department Acquisition Cost and Commercial Reimbursement for Physician-Administered Brand Medicines," visit: http://www.milliman.com/340b-HOP-Commercial-Reimbursement/

About PhRMA
The Pharmaceutical Research and Manufacturers of America (PhRMA) represents the country's leading innovative biopharmaceutical research companies, which are devoted to discovering and developing medicines that enable patients to live longer, healthier and more productive lives. Since 2000, PhRMA member companies have invested more than $900 billion in the search for new treatments and cures, including an estimated $79.6 billion in 2018 alone.

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SOURCE Pharmaceutical Research and Manufacturers of America (PhRMA)

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