CCAGW Applauds Chairman Walden, Burgess, and Murphy for Examination of 340B Drug Discount Program

July 6, 2017

The Honorable Greg Walden
Committee on Energy and Commerce

The Honorable Michael Burgess, M.D.
Subcommittee on Health

The Honorable Tim Murphy
Subcommittee on Oversight and Investigations

Dear Chairmen:

On behalf of the more than 1.2 million members and supporters of the Council for Citizens Against Government Waste (CCAGW), I am writing to thank you for your interest in the 340B drug discount program. When you hold your hearing on this important matter, I urge you to examine how the enormous growth of the program has led to overall increased drug and healthcare costs, and the negative repercussions for consumers and taxpayers.

CCAGW has been concerned about the 340B drug discount program for some time, and agrees with many of the points made in your June 1, 2017 letter to Health Resources and Services Administration (HRSA) Administrator George Sigounas, including the program’s rapid growth and lack of proportional HRSA oversight, which has been exacerbated by the passage of the Patient Protection and Affordable Care Act (ACA), or Obamacare. Investigations, audits, and studies by the Government Accountability Office (GAO), the HRSA Inspector General, news outlets, and private analytical organizations have shown that the program is rife with problems due to a lack of a clear definition of a 340B patient; no restrictions on how hospitals can use 340B drug savings; covered entities receiving duplicate discounts through Medicaid and 340B; diversion of drugs to ineligible patients; and utilization of contract pharmacies even though that is not permitted under the law.

A June 5, 2015 GAO report, “Medicare Part B Drugs: Action Needed to Reduce Financial Incentives to Prescribe 340B Drugs at Participating Hospitals,” confirmed what CCAGW had been saying for some time: many hospitals are profiteering from the 340B drug discount program and it needs to be reformed. GAO found that in “2008 and 2012, per beneficiary Medicare Part B drug spending, including oncology drug spending, was substantially higher at 340B DSH hospitals than at non-340B hospitals. This indicates that, on average, beneficiaries at 340B DSH hospitals were either prescribed more drugs or more expensive drugs than beneficiaries at the other hospitals in GAO’s analysis.” GAO wrote, “there is a financial incentive at hospitals participating in the 340B program to prescribe more drugs or more expensive drugs to Medicare beneficiaries. Unnecessary spending has negative implications, not just for the Medicare program, but for Medicare beneficiaries as well, who would be financially liable for larger copayments as a result of receiving more drugs or more expensive drugs.”

A June 16, 2016 WasteWatcher article highlighted the adverse effect the 340B program is having on cancer care by incentivizing hospitals to purchase oncology physician offices and then shifting chemotherapy care from these lower-cost facilities to higher-cost hospital outpatient settings. An April 2016 Milliman study found that between 2004 and 2014, chemotherapy infusions delivered in hospital outpatient departments increased from 15.8 percent to 45.9 percent in the Medicare population and 5.8 percent to 45.9 percent in the commercial population. The study also found that in 2014, 340B hospitals accounted for 50.3 percent of all hospital outpatient chemotherapy infusions.

A December 2016 Berkeley Research Group (BRG) report, “340B Program Sales Forecast: 2016-2021” found a much greater expansion than was predicted in its 2014 forecast. In 2014, BRG estimated that 340B program sales would reach $13 billion in 2016; sales were $16.1 billion. BRG now forecasts that total prescription drug sales at 340B prices will grow between $1.1 billion and $2.8 billion over the next six years, reaching $20 billion in sales by 2019, and top $23 billion by 2021. The 2016 study also showed the impact 340B has had on Medicare Part B. BRG noted, “340B hospitals have grown from accounting for 13 percent of Medicare Part B reimbursement in 2010 to 25 percent by 2015.” BRG contributes the growth to “a shift in site of care to the higher-cost outpatient setting that is driven, at least in part, by the sizeable margins realized by hospitals on drugs purchased through the 340B program.”

However, these increasing dollar amounts in the 340B program, which shifts and increases healthcare costs while boosting hospital and contract pharmacies’ coffers, does not have to occur, provided Congress acts prudently. CCAGW hopes the upcoming Energy and Commerce Committee hearing will provide more oversight of the drug discount program. Passage of reform legislation, which at minimum would provide a clear definition of a 340B patient and requirements on how hospitals can use 340B drug discount savings, will help return the program to Congress’s original purpose. Rather than benefit hospitals’ bottom lines, 340B can once again help low-income, uninsured patients get access to deeply discounted drugs and for 340B covered entities to “stretch scarce Federal resources as far as possible, reaching more eligible patients and providing more comprehensive services.”


Tom Schatz
President, CCAGW

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