340B Program Scrutiny Increases

InsightsTax News

A Review of Recently Released Reports by the Alliance for Integrity and Reform of 340B and the American Society of Clinical Oncology

Two reports issued in March and April 2014 are taking aim at the 340B Drug Pricing Program (Program).  These reports come on the heels of an OIG report issued in February 2014 criticizing the Program’s contract pharmacy arrangements.  As covered entities await the June 2014 publication of the “340B Mega Reg,” concerns are rising as to what effect the negative criticism will have on these impending regulations.

The 340B program’s purpose is to support access to prescription drugs for the vulnerable, uninsured and indigent patient population through the discounting of outpatient prescription drugs to qualifying facilities.  In exchange, qualifying facilities are expected to “pay it forward” by offering more charity care with the revenue generated from the discounted 340B drugs.

Below is a summary of the report issued by the Alliance for Integrity and Reform of 340B, as well as the report issued by the American Society of Clinical Oncology.

Alliance for Integrity and Reform of 340B’s Unfulfilled Expectations:  An Analysis of Charity Care Provided by 340B Hospitals[fusion_builder_container hundred_percent=”yes” overflow=”visible”][fusion_builder_row][fusion_builder_column type=”1_1″ background_position=”left top” background_color=”” border_size=”” border_color=”” border_style=”solid” spacing=”yes” background_image=”” background_repeat=”no-repeat” padding=”” margin_top=”0px” margin_bottom=”0px” class=”” id=”” animation_type=”” animation_speed=”0.3″ animation_direction=”left” hide_on_mobile=”no” center_content=”no” min_height=”none”][1]

This report contains the research findings and data analysis of a new study compiled by Avalere Health for the Alliance for Integrity and Reform of 340B[2] examining the amount of charity care provided by 340B hospitals. Alliance members believe that the 340B program is critically important to uninsured indigent patients and that attention is needed to address concerns over whether the program has deviated from its original purpose and is leading to unintended consequences for patients (340B reform.org).

The report questions whether the current statutory qualification criteria for hospitals are appropriately aligned with Congress’ goal of supporting vulnerable patient access to medical services.

The report findings were as follows:

  • About one-quarter of 340B hospitals provide charity care that represents 1 percent or less of their total patient costs.
  • In more than two-thirds of 340B hospitals, charity care as a percent of patient costs is less than the national average of 3.3 percent for all hospitals.  This means that less than one-third of 340B hospitals are providing more charity care than the average for all hospitals combined including for-profit hospitals.
  • Approximately one-fifth of 340B hospitals provide 80 percent of all charity care delivered by 340B hospitals.

Ultimately the findings from the study were conclusive of an overall lack of accountability by 340B hospitals to provide charity care.  The report recommended that Congress consider revising the eligibility criteria for hospitals to align with the program’s ultimate purpose of providing assistance to the uninsured and most vulnerable patients.

American Society of Clinical Oncology’s Policy Statement on the 340B Drug Pricing Program by the American Society of Clinical Oncology[3]

The American Society of Clinical Oncology’s policy statement provides a summary of the issues and recommendations related to the 340B program for policymakers to consider from the perspective of professionals dedicated to the prevention, diagnosis, and treatment of cancer.

The policy statement discusses the following four key issues raised by policymakers and various advocates:

  • Whether the program satisfies the original intent of the legislation.
  • Whether the size of the program is appropriate.
  • Whether adequate safeguards are in place to ensure appropriate compliance and oversight of the program.
  • Whether unique considerations related to cancer care warrant special attention by policymakers.

Does the 340B Drug Pricing Program satisfy the original intent of the legislation?  Many opponents to the size and rapid growth of the 340 Drug Pricing Program believe that the role of the program should be limited to providing low-income individuals with access to prescription drugs.

Is the size of the 340B Drug Pricing Program appropriate?  The size of the program has increased significantly from 2005 to 2011 to almost one third of all hospitals (1,673 hospitals).  The size of the program is often criticized due to the method used for qualifying a hospital as 340B eligible.  Hospitals qualify using the Disproportionate Share Hospital (DSH) adjustment percentage.  The DSH percentage is computed based on inpatient utilization, however only outpatients are eligible for the 340B program.  In addition, the DSH percentage is computed using Medicare and Medicaid utilization (insured patients), while the 340B Program was developed to assist uninsured patients.   The anticipated Medicaid expansion under the Affordable Care Act may result in more hospitals qualifying for the program.

Are adequate safeguards in place to ensure appropriate compliance and oversight of the 340B drug pricing program?  The Government Accountability Office (GAO) reported that the 340B program lacked sufficient oversight.  Covered entities are required to avoid diversion of covered outpatient drugs and ensure billing methods avoid duplicative discounts, but many are only self-policing as the primary means of compliance enforcement.

Do unique considerations related to oncology care warrant special attention by policymakers?  Cancer care is a more unique because of the prominent role that drug therapies play in anticancer treatment regimens. Outpatient oncology practices cannot qualify as standalone entities for the 340B Drug Pricing Program; however, hospitals are purchasing these practices as an added incentive to expand the patient base for cancer drugs that qualify for the 340B program.

The policy statement concludes with the ASCO providing four recommendations to be adopted by Congress and HRSA:

  1. HRSA, Congress, and other policymakers should promote transparency and accountability under the 340B Drug Pricing Program by requiring 340B-covered entities to provide, on an annual basis, a full, comprehensive accounting of the amount of 340B savings and the percentage of the savings reinvested into caring for the uninsured, underinsured and Medicaid patients.
  2. Congress should discontinue the use of the DSH adjustment percentage for other parameters derived from inpatient data as a means for determining eligibility for the 340B Drug Pricing Program.  It should be replaced by a formula that takes into account the percentage of underinsured and uninsured patients treated in the outpatient setting.
  3. New guidance should clarify and define “patient” and provide funding for key oversight activities related to the 340B Drug Pricing Program.
  4. Policymakers should pay attention to the possible adverse impacts that the 340B Drug Pricing Program may have on patient access to high-quality oncology care.  Policymakers should consider how the 340B Drug Pricing Program expansion affects patient access to care through the availability of community-based physician oncology practices.   The 340B program could be modified and better targeted to truly needy patients by appropriately identifying any entities that serve such patients.

For more information regarding the 340B Drug Pricing Program, please contact Cindy DuPree, CPA, FHFMA, CCS, at cdupree@draffin-tucker.com or (404) 220-8494, or Sarah Dekutowski, CPA, at sdekutowski@draffin-tucker.com or (404) 220-8494.

[1] Alliance for Integrity and Reform of 340B (2014). Unfulfilled Expectations: An analysis of charity care provided by 340B hospitals,1-12. http://340breform.org/userfiles/Final%20AIR%20340B%20Charity%20Care%20Paper.pdf.

[2] The Alliance for Integrity and Reform of 340B (AIR 340B) is a coalition of patient advocacy groups, clinical care providers and biopharmaceutical innovators dedicated to reforming and strengthening the 340B program to ensure it directly supports access to outpatient prescription medicines for uninsured indigent patients.

[3] American Society of Clinical Oncology.  (2014). Policy Statement on the 340B Drug Pricing Program by the American Society of Clinical Oncology.  Journal of Oncology Practice, 1-5. http://jop.ascopubs.org/content/early/2014/04/15/JOP.2014.001432.full.[/fusion_builder_column][/fusion_builder_row][/fusion_builder_container]