Surging Drug Sales Under Controversial Program Raises Concerns

The Health Resources and Services Administration (HRSA) has reported a significant 22.3% surge in wholesale 340B prescription medication sales, reaching a staggering $53.7 billion from 2021 to 2022. This controversial program, in which about one-third of the nation's hospitals participate, mandates manufacturer discounts on most outpatient pharmaceuticals to support safety-net providers.

However, this surge in sales has not come without its fair share of controversy. Drugmakers have increasingly voiced concerns about providers potentially abusing the program, leading to a series of manufacturer-imposed restrictions, legal battles, and heightened lobbying efforts in recent months.

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A recent report from industry blog Drug Channels, following a Freedom of Information Act request, revealed that hospitals accounted for the lion's share, spending $41.8 billion (77.9%) in 2022. Health center programs and children's hospitals followed suit with $2.8 billion (5.2%) and $1.7 billion (3.1%), respectively. Collectively, all hospitals made up 87% of program purchases.

It's important to note that the $53.7 billion figure encompasses indirect sales facilitated by Apexus' 340B Prime Vendor Program, responsible for negotiating prices and streamlining distribution. HRSA has underscored that the published totals do not encapsulate the entire scope of 340B Program purchases.

According to HRSA estimates, at least $470 million of the total expenditure may have exceeded the discounted pricing limit, a fact likely to draw support from 340B advocates. Participating providers experienced diminished savings due to restrictions imposed by over 250 drugmakers during legal disputes.

Additionally, as these figures emerge, Congress is turning a critical eye towards the program. Senator Bill Cassidy, Ranking Member of the Senate Health, Education, Labor, and Pensions Committee, has initiated an investigation into how certain hospital systems are allocating program savings. Cassidy pointed out instances like Bon Secours-owned Richmond Community Hospital's notable profitability and Cleveland Clinic's flagship hospital's involvement in a safety net program.

Cassidy emphasized the need to address concerning trends, stating, “The Government Accountability Office (GAO) has identified the troubling recent pattern of 340B-covered entities increasingly serving wealthier communities with higher insurance rates, which is far afield from the program’s intent.” Additionally, GAO found that covered organizations rarely communicate 340B discounts with patients.

In response to these developments, The Alliance to Save America's 340B Program, a coalition of community health centers, PhRMA, and others, commended Cassidy's inquiry. Thomas Johnson, the group's executive director, stressed, “The 340B program was intended to help true safety-net providers increase access to affordable health care services and medications,” citing HRSA's study. He pointed out that some participating entities have generated substantial profits without clear evidence of improved care or reduced costs for underserved patients.

As Congress delves into the matter, stakeholders in the healthcare sector continue to grapple with questions surrounding the program's intended purpose and its impact on patient care and costs.