Drug manufacturers participating in Medicaid offer lower prices, stretching resources and providing comprehensive services to more patients.
A recent report from the Commonwealth Fund puts the US health care system in last place compared with 11 other high-income countries.1
Despite spending the highest proportion of its gross domestic product on health care, the United States performed the worst in terms of access to care, administrative efficiency, health equity, and outcomes.1 Although the performance of the US health system affects all Americans, certain populations are at greater risk for health disparities based on their age, disability, ethnicity, gender, race, sexual identity, and socioeconomic status.2 Health disparities include, but are not limited to, differences in access to care, disease burden, life expectancy, mental health, and mortality.3
Health disparities have long been documented in the United States, evidenced by poorer outcomes for at-risk populations across a wide range of health conditions and indicators.4 Beyond the avoidable negative health outcomes, health disparities create an unnecessary financial burden on both the health care system and the patients. A study commissioned by the Joint Center for Political and Economic Studies and conducted by investigators at Johns Hopkins University and the University of Maryland examined the costs associated with health disparities over a 4-year period.5 The investigators analyzed economic burden across 3 measures: costs of premature death, direct medical cost of health inequalities, and indirect cost of health inequalities. The total direct and indirect costs over the 4-year period totaled $1.24 trillion.5
The COVID-19 pandemic has brought health disparities into sharper focus. Health systems, nonprofit agencies, pharmacies, and the US government are working to promote health equity and reduce disparities.
“Health equity is achieved when everyone can attain their full potential for health and well-being,” according to the World Health Organization.6
For qualified health systems, cost savings generated through the 340B pharmacy program provide significant opportunities to reduce health disparities.
The 340B program was designed to “stretch scarce federal resources as far as possible, reaching more eligible patients and providing more comprehensive services,” according to the Health Resources & Services Administration.7
The program works by requiring drug manufacturers participating in Medicaid to provide outpatient drugs at a reduced price for qualified health care organizations. Eligible health organizations are referred to as covered entities (CEs). They are defined by statute and include certain health centers, hospitals, Ryan White HIV/AIDS program grantees, and specialized clinics that serve at-risk or vulnerable populations.7 The difference between what a CE pays for 340B drugs and what they are reimbursed by third-party payers generates cost savings that can be used to expand services, invest in community health initiatives, provide care for individuals who are underinsured or uninsured, and offer discounted or free medications.
Promoting Health Equity
CEs often care for low-income, minority, underserved, or vulnerable populations. 340B disproportionate share hospitals (DSHs) treat a significantly higher number of low-income and Medicaid patients than non-340B acute-care hospitals. Additionally, 340B DSHs are more likely to provide “essential community services” that are considered “low-margin” or not always reimbursed by third-party payers.
These services often focus on at-risk patients and include community health programs addressing behavioral health, health care access, and social determinants influencing health.8 In its 2021 340B Hospital Community Benefit Analysis, the American Hospital Association examined public tax records of tax-exempt 340B hospitals. The analysis shows that cost savings generated by the 340B program provided $67.9 billion in total community health benefits.9
“340B savings are used to provide a wide range of support for underserved communities, including diagnostics, counseling, transportation, and translation services,” said Sabine Enright, PharmD, director of 340B services at BioMatrix Specialty Pharmacy. “These services are a critical resource helping to address disparities and promote health equity.”
In addition to making up for low-margin or nonreimbursable services, some hospitals rely on 340B cost savings to support staff salaries and, in some cases, keep their doors open.
Hemophilia treatment centers provide specialized support for patients with bleeding disorders. 340B cost savings provided up to 90% of funding for critical staff, including nurses, physical therapists, and social workers at these centers, according to a 2018 report.10
Critical access hospitals (CAH) are 340B-eligible organizations serving rural populations, which often face health disparities such as less access to care and poorer outcomes.11 CAH provide essential support for at-risk communities, but they face significant financial challenges that often threaten their ability to remain open.12 In a survey of more than 500 hospitals that were 340B-eligible, three-fourths of CAH respondents indicated that the 340B program is essential to staying open.13
Improving Outcomes, Reducing Disparities
340B cost savings allow CEs to enhance services and stretch resources. In addition to financing essential community support services, funding critical salaries, and keeping doors open, the support provided at the 340B pharmacy level can promote equity and reduce disparities. The 340B program permits CEs to use an in-house pharmacy, contract with external pharmacies, or use a combination of both to expand access and better serve unique patient communities. There is no cap to the number of contract pharmacy arrangements that a CE can deploy. This flexibility allows CEs the ability to maximize cost savings, better meeting the needs of the communities and patients they serve. CEs can leverage their 340B pharmacy staff members to enhance the clinical and support services provided to patients.
CEs often use cost savings to develop programs integrating pharmacists as central members of the care team.14 Deploying integrated pharmacy services has been shown to improve outcomes and patient satisfaction while reducing health care costs.15 340B hospitals have used cost savings to integrate members of the pharmacy team, increasing adherence, providing targeted services for unique patient populations, and reducing hospital readmissions.14 Many programs dispense specialty drugs for patients with chronic or difficult-to-treat health conditions.
“Contracting with a specialty pharmacy that has specific therapeutic experience can enhance clinical support, improve patient engagement, and assist with other critical aspects of care, such as timely medication access and connection to financial assistance programs,” Enright said. “Highly trained, culturally competent staff add an additional layer of support at the individual patient level, reducing disparities and enhancing the patient’s overall health care experience.”
Contract pharmacy arrangements help CEs extend the geographic reach of their programs. In urban areas, pharmacy deserts leave Black and Hispanic patients with fewer options to access medication.16 In rural areas, an increase in hospital closures threatens to place vulnerable communities at even greater risk.12 Contract pharmacy partnerships can help solve that problem.
“Contract pharmacy arrangements help extend program reach to benefit a larger population of patients, often whom reside in rural or economically challenged areas,” said Pete Pecoraro, national account manager for 340B program and client services at BioMatrix Specialty Pharmacy. “These partnerships are critical in expanding both medication access and clinical support for patients residing in at-risk and underserved communities.”
Toward a More Equitable Health System
The 340B program is not without controversy. Recent research questions the amount of uncompensated care that some hospitals participating in the program provide.17 Several drug manufacturers are pushing back against providing discounts for contract pharmacies.18 But organizations such as the American Hospital Association and 340B Health maintain that the program is working as intended.19,20 They cite the multitude of unique ways that hospitals use 340B funds to enhance services, expand access, support patients, and ultimately create healthier communities. The 340B program still has a high level of support. In February 2021, a large bipartisan group of lawmakers voiced their support for protecting the program.21 Debate continues but achieving health equity will require an all-hands-on-deck approach to identify and systematically address the health disparities negatively affecting US communities.
“There is no single program in existence today that does more to promote health equity than the 340B drug pricing program,” Pecoraro said. “Whether increasing access to care, expanding operations, or financing community services, 340B extends critical support to patients who would not have access to similar resources in the absence of the program.”
As the US moves toward a more equitable health care system, a broad coalition of community health workers, health systems, lawmakers, pharmacies, and professional health agencies agree that the 340B program will continue to play a critical role in promoting healthier communities and reducing health disparities.
Justin Lindhorst, MBA, is marketing director/regional care coordinator at BioMatrix Specialty Pharmacy in Plantation, Florida.