Practice Matters

News from Lola Butcher about health policy and practice management issues of importance to oncologists

Monday, April 22, 2013

340B Drug Discount Program Draws Scrutiny

For years, the 340B Drug Discount Program has been a source of pride for some oncologists, a source of envy for others, and a source of confusion for those of us who wondered what it was all about.


But now that the fast-growing program is creating a haves-vs.-have nots differential between oncology practices, I suspect we are going to be learning a lot more about exactly how this works.


The 340B program allows some hospitals -- and, importantly, hospital-affiliated practices -- to buy drugs at deep discounts, ostensibly to help offset their costs for treating poor patients. The program started out small but that didn’t last; a Government Accounting Office report found that the number of hospital participating increased from 591 in 2005 to 1,673 in 2011, by which time nearly one-third of all hospitals in the country were eligible for the discounts.


The pharmaceutical industry, which doesn’t like to be a loser when it comes to money, is getting fed up. Last month, a group of drug trade associates published a white paper lambasting the overuse of the discount program.


The next day, Andrew Pollack, a reporter at The New York Times, cited the Community Oncology Alliance when he said that an oncologist who receives a 25 percent discount might reap a potential profit of up to $1 million in a single year. The article discusses how oncologists can buy drugs at a discounted rate but they are reimbursed at regular rates, meaning they simply make more profit.


He quoted Peter Bach, MD, MAPP, director of the Center for Health Policy and Outcomes at Memorial Sloan-Kettering Cancer Center, calling 340B “the loophole that’s made cancer drugs profitable again.”


Today, Bach and his co-author, University of Chicago health economist Rena Conti, PhD, published a Viewpoint article in the Journal of the American Medical Association, saying that the 340B program may actually be increasing the costs of patient care, because, among things, it encourages private oncology practices to affiliate with 340B-eligible hospitals -- and hospitals are reimbursed for drug administration at higher rates than independent practices.


The authors summarize their perspective this way: “…most of the costs of the program are borne by manufacturers; the financial benefits of the 340B discounts are accruing almost entirely to hospitals, clinics, and physicians; and patients’ out-of-pocket costs and total cost of care are being increased.”