Photo: Cavan Images / Getty Images
Some safety net hospitals charge insurers an average of 3.8 times the cost of purchasing oncology drugs, although depending on the drug, the mark-up can be much higher – up to 11 times the price of. purchase, according to a new report.
Founded in 1992, 340B is a federal program that requires drug manufacturers to provide outpatient drugs at significantly reduced prices to qualifying health organizations supposed to treat large numbers of uninsured, low-income patients. Hospitals say the savings are being used to lower the price of drugs for patients and expand healthcare services, but the report says the discounts are being captured by hospitals as profits rather than being passed on.
According to the Community Oncology Alliance, which wrote the report, disproportionately 340B hospitals are entitled to a ceiling price discount of 23.1% off the average selling price (ASP), but the discount may be higher if the drug price increases above the rate of inflation. . Pharmaceutical companies may offer additional discounts to 340 hospitals beyond the price cap – a common practice in competitive markets.
The actual prices paid per drug are not disclosed, but in 2020, the Centers for Medicare and Medicaid Services estimated the average discount at 34.7% on ASP.
WHAT IS THE IMPACT
Researchers found that 340B hospitals were not fully complying with federal hospital transparency regulations that came into effect this year. Working from the full list of 1,087 acute care hospitals, a disproportionate share of 340 billion hospitals, the researchers found that only 123 facilities – 11% of the total – had released all the required data on acute care. drug prices, despite US Department of Health and Human Services regulation. effective January 1, 2021, requiring the release of pricing data to avoid a relatively minor fine of $ 300 per day.
The rest did not follow the mandate or published data that was difficult to analyze or incomplete.
The report highlights the infused multiple myeloma drug Darzalex as an example of how 340B hospitals are benefiting different patients and payers. Given various discounts, a community oncology practice, for example, would pay $ 116,876 for a one-year treatment with Darzalex and be reimbursed by Medicare at $ 123,889, or $ 7,013 to cover administration costs. of the drug.
A 340B hospital would buy the same amount of the same drug for $ 76,320 and be reimbursed by Medicare at $ 90,579, or $ 14,259 for the administration of the drug.
That same 340B hospital treating a patient with commercial insurance would also buy the same amount from Darzalex for $ 76,320. But the hospital will bill the insurer 3.8 times that amount, or $ 290,016, making a profit of $ 213,696 for a single patient, or 15 times that of a Medicare patient.
COA calculated the median hospital margin of 340 billion by comparing the prices negotiated by hospitals for insured patients with the ASP published for the third quarter of 2021, discounted by 34.7%, and found that the increase in price ranged from 2.4 times (for the drug Adcetris) to 11 times higher (for Epogen).
Looking at the data, the COA found that the highest markups were for drugs in competitive markets, primarily biosimilars and their reference drugs. In these markets, the purchase price paid by hospitals is greatly reduced compared to their wholesale acquisition cost (WAC).
The report found that 340B hospitals often did not list the biosimilar option of a treatment and charge almost identical rates to patients paying in cash as they did to insurers.
In addition, 340B hospitals do not reduce the prices they charge insurers or patients when their acquisition prices drop, thus negating price reduction efforts at the manufacturer level. These hospitals are also slow to adopt biosimilars, according to the report.
There are also price inconsistencies between hospitals, with some drug prices being twice as high as the median – in fact, 7.6 times or more than their purchase price – and even within hospitals, drugs are priced higher than the median. fees can vary widely.
As to why insurers have not acted to reduce drug prices, COA has put together a number of hypotheses. On the one hand, the balance in the negotiating position is often not on the insurer’s side. More moderate insurers are often unable to negotiate better prices and therefore often accept the hospital price.
The second hypothesis is that insurers simply did not focus on drug costs, both for organizational reasons and because outpatient drugs were not a major cost center until relatively recently. The third hypothesis: Insurers focus on shifting drug use to non-hospital settings, such as community clinics or specialty pharmacies, rather than trying to negotiate prices with hospitals.
In the end, the COA concluded that relying on the current market structure to reduce costs was not effective. Transparency of hospital prices can help shake things up a bit and could potentially put some pressure on hospitals to control their prices.
THE BIGGEST TREND
Unsurprisingly, the report drew criticism, particularly from advocacy group 340B Health, which called the Community Oncology Alliance an “anti-340B group” and said the report “is very flawed and presents an inaccurate picture of the role that plays 340B in health care security in the United States. report.”
Noting that COA has long been a vocal critic of the 340B program and participating hospitals, 340B Health pointed out what it saw as “many errors” that render the report inaccurate.
First, the group said, the report does not understand how Congress structured the 340B. Lawmakers created the 340B program to deliver savings through lower drug costs to support a wide range of services for low-income patients; in other words, the 340B is performing as expected, the group argued.
Second, the organization estimated that the report overstates the value of the $ 340 billion rebate as the difference between the cost of purchasing the drug and reimbursement. Instead, 340B Health stated that the value of the rebate is the difference between what 340B’s suppliers would have paid in the absence of the program (the group’s pricing organization or the GPO price) and the actual acquisition cost.
340B Health also said the report “does not take into account the many ways that 340B hospitals are using savings to provide unpaid, unreimbursed care as well as life-saving services that cost more to provide than the reimbursements they have. provide, including trauma and burn care, HIV care, and mental health care to inpatients.
The organization also highlighted what it considered to be several technical issues in the methodology of the report. The authors, said 340B Health, used a sample of only 123 DHS hospitals out of a total of over 1,000 such hospitals in 340B, a sample size insufficient to draw general conclusions about an entire industry sector. hospitable.
“When these types of reports find their way into the public dialogue about the 340B program, they mask the immense benefit the program does to the health care safety net and the patients it serves,” 340B Health wrote. “Policymakers who understand the benefits and intent of the program will recognize the flaws in these arguments.”