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Proposed Review of 340B Drug Discounts Irks Hospitals

 |  By John Commins  
   March 26, 2014

Contending that hospitals taking advantage of mandated lower drug prices should be held accountable for the levels of charity care they provide, a group funded by the pharmaceutical industry is getting pushback from two major hospital associations.

A group funded by the pharmaceutical industry wants Congress to review the 340B outpatient drug discount program to ensure that hospitals aren't gaming the system.

The Alliance for Integrity and Reform of 340B says in a report out this week that "a substantial portion" of hospitals that have enrolled in the 340B program don't provide enough charity care to justify their discounts and may not be living up the spirit and intent of what Congress envisioned when the program was created in 1992.  

AIR 340B spokesperson Stephanie Silverman says her group does not want to see the 340B program abolished, but does believe that hospitals taking advantage of the mandated lower drug prices should be held accountable for the levels of charity care they provide.

"When a program expands well beyond its original intent, there are legitimate questions about sustainability. For hospitals that are doing the right thing, we don't want to jeopardize their program," Silverman said.

"The concern is for those that don't want to be on the hook for colleagues in the industry who are not deploying the resources appropriately. There is always a threat, which we are not advocating, of throwing the baby out with the bathwater. We are trying to define where the bathwater is."

The AIR 340B study found that:

  • More than two-thirds of hospitals that receive 340B drug discounts provide less charity care as a percentage of patient costs than the national average for all hospitals, including for-profit hospitals which do not qualify for 340B.
  • For 24% of 340B hospitals charity care represents 1% or less of the hospitals' total patient costs.
  • Only 22% of 340B hospitals provide 80% of all charity care delivered by 340B DSH (disproportionate share) hospitals.
  • Drug purchases through the 340B program will almost double, from $6 billion in 2010 to $13.4 billion by 2016, a cost which will be borne by drug makers.

Silverman says the 340B program lowers outpatient drug costs for participating hospitals on the presumption that they will help vulnerable, uninsured patients but that there are no restrictions on how hospitals spend the revenues generated if they charge both insured and uninsured patients higher prices than the 340B discount.

That contrasts with requirements on other providers in the 340B program who must show that they provide services to vulnerable populations and that they reinvest the revenues into specific services for their vulnerable populations.

"What we would like to see done is for Congress to do a full examination of appropriate eligibility criteria," Silverman says. "We want to be partners in that conversation with other stakeholders. We also believe there needs to be substantially more oversight by regulators and more requirements for accountability among hospital participants on how the funds are deployed and whether or not they are reaching their intended beneficiaries."

Hospitals Push Back
AIM 340B's claims have been hotly disputed by the hospital lobby.

Linda Fishman, the American Hospital Association's senior vice president for public policy analysis and development, told me in an email exchange that the AIM 340B report "ignores the fact that the 340B program enables hospitals to provide essential healthcare services to the nation's most vulnerable populations."

"This vital role 340B hospitals play in their communities cannot be boiled down into a few data points derived from publicly reported information such as the Medicare's Cost Report S-10 worksheet; it is found in the programs and services these 340B hospitals provide every week, every day, every hour. Charity care alone does not account for the myriad programs and services that hospitals provide, which are tailored to the needs of their own unique community," Fishman wrote.

"The more important fact is that 62% of all uncompensated care provided by our nation's hospitals is provided by 340B hospitals. Uncompensated care for these hospitals includes sponsored charity care programs to assist patients seeking care, as well the unreimbursed care provided to patients after care is rendered. Half of all 340B hospitals provide care in rural areas with more than 41% designated as Critical Access Hospitals."

 

Beth Feldpush
Senior Vice President, Policy and Advocacy, for America's Essential Hospitals

"The 340B program generates valuable savings on outpatient drugs for these eligible hospitals to reinvest in community programs such as free vaccines, mental health clinics, community dialysis programs or free or reduced priced prescription drugs. To qualify for the 340B Drug Pricing Program, hospitals must serve a disproportionate share of low-income and uninsured people in their communities or be critical access hospitals providing essential services to their rural communities. In addition, these hospitals must provide services to low income populations that do not qualify for Medicaid or Medicare."

'Consider the Source'
Beth Feldpush, senior vice president, policy and advocacy, for America's Essential Hospitals, says anyone reading the AIM 340B report should "consider the source behind it."

Feldpush says a 2011 report by the Government Accountability Office found that that 340B program was fulfilling the program obligations. "To me that says the program really is benefitting patients and giving hospitals and providers the ability to provide drug and other services to patients that they otherwise would not be able to do if the 340B program was not in place."

However, the GAO report also validates concerns raised by AIM 340B. Federal auditors called the Health Resources and Services Administration's oversight of the 340B program "inadequate" and overly reliant on "self policing to ensure compliance."

"For example, the agency does not periodically confirm eligibility for all covered entity types, and has never conducted an audit to determine whether program violations have occurred," the GAO report said. "Moreover, the 340B program has increasingly been used in settings, such as hospitals, where the risk of improper purchase of 340B drugs is greater, in part because they serve both 340B and non-340B eligible patients."

The report continues, "This further heightens concerns about HRSA's current approach to oversight. With the number of hospitals in the 340B program increasing significantly in recent years—from 591 in 2005 to 1,673 in 2011—and nearly a third of all hospitals in the U.S. currently participating, some stakeholders, such as drug manufacturers, have questioned whether all of these hospitals are in need of a discount drug program."

Feldpush concedes that safety net hospitals are frustrated by the relatively "informal" administration of the program.

"We look at Medicare and Medicaid and those programs are run by the agency giving guidance to hospitals through formal rule making processes and through codified regulations. The 340B program has been largely run through informal guidance. HRSA has used things like—and I am not making this up, 'frequently asked questions' posted on its Web site to provide official guidance on the program."

"That has been a challenge for hospitals," she said, "because they are by their nature highly regulated and they do want to make sure that they are following the program in the right way. So, it's very hard to make sure that if you are following the program guidance to a 'T' without that formal rulemaking process."

HRSA is now reforming its rulemaking process to include formal notice and comment periods and those reforms should be made public this summer, which Feldpush says "is very much a good step forward."

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John Commins is a content specialist and online news editor for HealthLeaders, a Simplify Compliance brand.

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