MedPAC: 340B Hospitals Treat Sicker Patients, But are Not to Blame for Higher Drug Costs

January 23, 2020

The nonpartisan federal Medicare Payment Advisory Commission (MedPAC) met recently to cover several topics. Among them was a 2018 inquiry from the U.S. House Energy and Commerce Committee on whether MedPAC could find evidence the 340B prescription drug discount program leads hospitals to increase the use of costlier prescription drugs to generate higher revenue margins. MedPAC reported that its analysis could not find a conclusive linkage.
MedPAC staff analyzed data from an Office of Inspector General report examining 340B spending related to cancer drugs. They found that while there is a potential for hospitals to earn higher margins from some higher-priced cancer drugs, this varied based on the type of cancer and some lower-priced drugs offering higher margins than higher-priced drugs. Staff also noted that some of the data provided limited insight, as the specific drugs were not named, and it was unknown whether any cheaper therapeutically-similar drugs were available as an alternative.
MedPAC staff also noted that the 340B hospitals typically care for patients with later stages of cancer and include a higher proportion of younger patients who select more aggressive treatments that are often costlier. For the types of cancer that did see a correlation with higher spending, the commissioners agreed it was more appropriately correlated to those higher-cost cancers rather than any incentive within the 340B Program. MedPAC noted that a 2015 U.S. Government Accountability Office report found similar correlations but was also criticized for not sufficiently controlling the differences in patient mix
MedPAC also looked at hospitals new to the 340B program to see whether their prescription drug spending grew. While the sample size was small, there was no indication of prescription drug spending growth in such hospitals from 2013-2017. Despite these conclusions, the commissioner asked staff to continue looking into whether there are any correlations with 340B spending related to hospital consolidation, physician ownership or hospital outpatient department billing. For more information, contact WHA’s Director of Federal and State Relations Jon Hoelter.

This story originally appeared in the January 23, 2020 edition of WHA Newsletter