Study: 340B Hospital Profits, Cancer Costs Increasing

The average profit from cancer drugs administered by 340B hospitals was nearly 50% in 2015.

A new analysis conducted by the Berkeley Research Group and released by the Community Oncology Alliance (COA) suggests that cancer drug profits have boomed among hospitals participating in the 340B program.

The authors of the study discovered that profits for the drugs skyrocketed to 49% in 2015, despite significant manufacturer discounts, which may further increase cost pressure on cancer therapies, according to a press release.

COA said this new report adds to existing research realted to the 340B program, while also examining the program’s role in moving cancer care to hospitals. The report also analyzes the discounts received by participating hospitals and how they affect drug prices.

The study authors suggest that hospitals participating in the 340B program play a significant role in cancer costs. The profits from the 340B program may have even created financial incentives for hospitals to extend oncology services through expansion of acquisitions, according to the release.

The transition from community oncology practices towards hospitals can lead to higher costs for patients, Medicare, and tax payers, according to the COA.

A previous COA report found that the cost of chemotherapy for patients with cancer was nearly 60% more expensive at hospitals than at independent, community oncology practices, which plays a role in high drug costs. The difference in treatment location could cost patients up to $90,144 per year for treatment.

In the new study, the authors found that the average profit from 340B cancer drugs increased from 40% in 2010 to nearly 50% in 2015, according to the release. The COA stated that this profit boom may encourage hospitals to administer more cancer drugs.

Approximately 67% of all Medicare Part B reimbursement for hospital oncology drugs were made to 340B hospitals compared with only 38% in 2008, according to the study.

Additionally, the authors found that discounts increased from 54% in 2010 to 63% in 2015, which may be another incentive for hospitals to expand their oncology services, COA reported.

Under the 340B program, manufacturers are required to offer discounts and rebates for the drugs. These discounts and rebates totaled $1 billion in 2010, accounting for 7.4% of total gross sales. This figure skyrocketed to $3 billion in 2015, comprising 14.4% of total sales for the same drugs, according to the study.

The upward growth of the 340B program, cancer drug purchasing increases, and Medicaid expansion has led to the significant boom in discounts, according to COA. Since the discounts are increasing rapidly, manufacturers may be inclined to raise list prices to offset potential profit losses, according to the release.

“These study findings show what I and other oncologists across the country see every day: 340B hospitals are putting enormous pressure on community practices to be acquired, resulting in the consolidation of cancer care and leaving patients to pay the price,” said Jeff Vacirca, MD, CEO of NY Cancer Specialists in New York. “340B discounts have become an enormous and vicious profit generator for hospitals, with patients and taxpayers left to shoulder the increasing costs of cancer care. This madness has to stop.”

The 340B program has been highly debated recently. While proponents argue that the program increases access to treatment for low-income and uninsured patients, opponents counter that the growth of the program has caused a ripple effect throughout the industry.

“340B should be an important safety net for patients in need but it has mutated into a nightmare of increasing costs for seniors, adversely impacting cancer care, and fueling drug prices,” said Ted Okon, executive director of COA. “I applaud the efforts of the Energy & Commerce Committee to shed much-needed light on this broken but critical 340B program and CMS for taking the first step in trying to address abuses. Congress must legislate program transparency and accountability to ensure that 340B savings help patients in need.”