340B Program Larger Than Previously Thought, Costs Patients More for Cancer Care

Average reimbursement for Part B oncology drugs is 52% higher in 340B hospitals than in community cancer clinics.

Average reimbursement for Part B oncology drugs is 52% higher in 340B hospitals than in community cancer clinics.

A recent study found that the 340B drug discount program is much larger than previously believed. Much of the growth was attributed to oncology drugs, for which 340B hospitals cost Medicare and beneficiaries more than community oncology clinics.

According to the study, hospitals participating in the 340B program accounted for 58% of all Medicare Part B hospital outpatient drug reimbursements in 2013. These hospitals also accounted for 60% of reimbursements for just oncology drugs.

During the study period of 2010 to 2013, both metrics saw double-digit growth increases from 43 and 47% respectively. As more hospitals become 340B eligible, this trend is set to continue.

“The 340B program is a critical safety net for patients in need in the hospital setting,” said Bruce Gould, MD, president of the Community Oncology Alliance (COA) and a practicing community oncologist with the Northwest Georgia Oncology Centers in Marietta, Ga. “However, I am shocked at how big the program is, as revealed by this new study, and am very concerned about the higher costs of cancer treatment for patients and Medicare in 340B sites.”

The average reimbursement for Part B oncology drugs is 52% higher in 340B hospitals than in community cancer clinics, when compared on a per Medicare beneficiary basis. These hospitals also saw a 123% increase in total Part B reimbursement for oncology drugs between the times of the study duration. Over the same time period, researchers observed a 31% increase at non-340B hospitals and a 5% decrease to community oncology clinics.

“This study adds to the findings from GAO and others that 340B has not only grown way beyond the original congressional intent but also that 340B hospitals are costing Medicare and the seniors they treat more for cancer care,” said Ted Okon, executive director of COA. “With so much attention on the escalating costs of cancer drugs, congress has to address the runaway 340B program, which has huge profit incentives for hospitals, and its role as a major driver of cancer care costs.”

The Government Accountability Office (GAO) conducted an independent study on the 340B program and concluded that, “The financial incentive to maximize Medicare revenues through the prescribing of more or more expensive drugs at 340B hospitals also raises concerns… Not only does excess spending on Part B drugs increase the burden on both taxpayers and beneficiaries who finance the program through their premiums, it also has direct financial effects on beneficiaries who are responsible for 20 percent of the Medicare payment for their Part B drugs. Furthermore, this incentive to prescribe these drugs raises potential concerns about the appropriateness of the health care provided to Medicare Part B beneficiaries.”

Additionally, the study found that hospitals newly enrolled in the 340B program since 2010 accounted for almost one-fourth (23%) of the total 340B Part B hospital outpatient drug spend in 2013.

Even though the count of total 340B disproportionate share hospitals (DSH) remained almost unchanged, from 2010 to 2013 the percentage of total hospital outpatient revenue at 340B DSH increased from 37% to 40%. Total outpatient revenue at DSH increased by nearly 10% despite the fact that the total number of 340B DSH remained unchanged. This indicates that, on average, 340B DSH have larger outpatient facilities than their non-340B counterparts, and this gap is growing.