Thursday, March 30, 2017

340B Program: Don't throw the baby out with the bathwater

By: Brandon M. Macsata, CEO, ADAP Advocacy Association

The pharmaceutical industry and other interest groups have lobbied Congress to "reform" the 340B Drug Pricing Program, which they claim is riddled with waste, fraud, and abuse. Abound are damaging audits and reports that certainly back up the claim, except this over-generalization can be dangerous. Whereas hospitals are the program's primary participating vendors, there are many other smaller entities that also leverage the discounts on prescription drugs to assist their clients. No better example exists than the Ryan White covered entities, including Ryan White clinics, State AIDS Drug Assistance Programs (ADAPs), and other safety net providers.

The Health Resources and Services Administration (HRSA) summarizes the 340B Drug Pricing program as follows:
"The 340B Drug Pricing Program requires drug manufacturers to provide outpatient drugs to eligible health care organizations/covered entities at significantly reduced prices. The 340B Program enables covered entities to stretch scarce Federal resources as far as possible, reaching more eligible patients and providing more comprehensive services. Eligible health care organizations/covered entities are defined in statute and include HRSA-supported health centers and look-alikes, Ryan White clinics and State AIDS Drug Assistance programs, Medicare/Medicaid Disproportionate Share Hospitals, children’s hospitals, and other safety net providers."[1]
It is understandable why the drug manufacturers — most of which are required by law to to provide significant discounts (20-50%) off drug pricing— would be concerned about the growth of the program. Total sales under the program increased from $1.1 billion in 1997 to more than $7 billion in 2013,[2] and quickly climbing toward $20 billion. There are plenty of shenanigans with hospitals boosting their profits rather than providing supports and services for low-income and uninsured patients.[3] A recent study concluded, “Our findings support the criticism that the 340B program is being converted from one that serves vulnerable patient populations to one that enriches hospitals and their affiliated clinics.”[4]

Some in Congress are also alarmed. Senator Charles E. Grassley (R-IA) is chief among them, arguing a few years back, "Congress needs to know the extent to which the agency believes it lacks the statutory authority to ensure that hospitals use the 340B program to help the uninsured receive affordable prescription drugs. Medicare and private insurance are paying much more for some drugs than the hospitals paid because of the program discount. Congress needs a full picture of how hospitals are using the program and how their uses affect other programs in the health care system.[5]

Photo Source: Brendan Smialowski/Getty Images
But there is an age-old saying, "Don't throw the baby out with the bathwater."

Earlier this year, Harish Thiagaraj authored a detailed report on how AIDS Service Organizations (ASOs) — some of which are Ryan White covered entities — have served as the poster child for the success of the 340B Drug Pricing Program. Thiagaraj accurately notes that proposed "reforms" to the program would leave such HIV entities largely untouched,[6] but there is no guarantee that harmful changes, or unintended consequences couldn't result from the programmatic reforms targeting large hospitals.

The study concludes:
"Those in the 340B industry realize that the 340B Drug Discount Program runs much more deeply than lower cost prescriptions. It provides treatment for those who are seriously ill. Its savings go towards valuable community services. Its creation was born out of necessity, and program growth directly correlates with better health and outcomes, which the Ryan White clinics’ achievements exemplify."[7]
Thiagaraj's assessment couldn't be more accurate, and we applaud him. Ryan White covered entities participating in the 340B Drug Discount Program have contributed to achieving viral suppression, and more needs to be done. The savings are re-invested back into the clinics, thereby allowing them to offer much needed supports and services to their clients.

Source: Wellpartner
That said, it is important that the integrity of the program is protected.

"The 340B program has been challenged since its inception," summarized Jeffrey R. Lewis, President and Chief Executive Officer at Legacy Health Endowment. "The challenge today is to ensure that the program is operating the way Congress intended. To accomplish this, Legacy Health Endowment will be organizing a national commission to recommend specific ways to ensure the long term solvency of the 340B program, and to determine what changes may need to be made to ensure that the program does not exceed its Congressionally mandated purpose."

Next month this issue will be discussed at the ADAP Advocacy Association's AIDS Drug Assistance Program Regional Summit in Raleigh, North Carolina. "Ryan White & 340B Drug Access" is one of the topics on the agenda with leading policy stakeholders concerned about the future of the program, and potential impact on patients living with HIV/AIDS and other underserved populations.

[1] Health Resources and Services Administration (2017). 340B Drug Pricing Program. U.S. Department of Health & Human Resources. Retrieved from: 
[2] Vandervelde, Aaron (November 2014). GROWTH OF THE 340B PROGRAM: PAST TRENDS, FUTURE PROJECTIONS. Berkley Research Group. Retrieved from:
[3] Adamopoulos, Helen (2014, October 7). Are hospitals abusing the 340B drug discount program? New study reignites controversy. Becker's Hospital CFO. Retrieved from:
[4] Myers, Nan (2016, May 31). Concerns Persist about the 340B Program. Pharmacy Times. Retrieved from:
[5] Sen. Charles Grassley (2013, October 13). Grassley: Questions Continue About 340B Discount Drug Program. United States Senate. Retrieved from:
[6] Thiagaraj, Harish (2017, January 18). The 340B Drug Pricing Program Success Story: Ryan White HIV Entities," 2017. Wellpartner. Retrieved from: 
[7] Thiagaraj, Harish (2017, January 18). The 340B Drug Pricing Program Success Story: Ryan White HIV Entities," 2017. Wellpartner. Retrieved from: 


David Poole said...

Fair balance on any issue is always welcome and in this case the ADAP Advocacy Association did so for the most part - however, it should be reemphasized that the 340b Program provides much needed opportunity for the non-profit and Ryan White safety net of care and treatment organizations throughout the U.S. and the territories to reinvest back into their programs without restriction or the burden of gross scrutiny and burdensome bureaucracy. The Ryan White grantees represent a very small portion of the overall reported discounts cited and should be left to continue to operate as it has for nearly 20 years without the additional burden of unnecessary audits and contractual requirements not supported by the Ryan White law or Veterans Care Act of 1992. HRSA should be more focused more on how to ensure the long standing safety net of providers can remain viable and not try to place barriers and hardships on the countless providers across the nation who have carried the weight of care and treatment on their shoulders now for over 3 decades.

Adam J. Fein, Ph.D. said...

Very good points. The good apples—the 340B entities that require additional financial support and legitimately support needy patients—should be worried that the bad ones could rot away the program for everyone.

Unfortunately, many large, profitable, well-funded health systems are profiting from the 340B program but may not be using the funds for the right purposes. Hospitals of all types now receive 340B discounts on almost half of their drug purchases. See 340B Purchases Hit $12 Billion in 2015—And Almost Half of the Hospital Market. That's hardly a fraction of the market.

BTW, some of the harshest critics of the 340B program and its operations have come from U.S. government agencies, including: the Office of Inspector General, the General Accounting Office, and the Medicare Payment Advisory Commission. These government oversight groups have been at the forefront of recommending changes to the government's 340B program. None of them can reasonably be considered to be "Big Pharma."