Hospitals slam GAO report criticizing 340B drug program

Hospitals say the Government Accountability Office used faulty methodology when it found that hospitals that serve high numbers of low-income patients abuse a federal drug discount by overprescribing medications. HHS raised similar concerns about the findings.

Hospitals that serve a disproportionate share of uninsured and low-income patients have access to discounted prices on outpatient drugs through the 340B Drug Pricing Program, administered by the Health Resources and Services Administration. Drugmakers have argued that the program is being exploited by hospitals for financial reasons and should be pared back.

A GAO report released last week found that in 2008 and 2012, per-beneficiary Part B drug spending, including oncology drug spending, was substantially higher at hospitals using the 340B discount than at other hospitals. For example, in 2012, average per-beneficiary spending at 340B hospitals was $144, compared with about $60 at hospitals not in the program.

“This indicates that, on average, beneficiaries at 340B disproportionate-share hospitals were either prescribed more drugs or more expensive drugs than beneficiaries at the other hospitals in GAO's analysis,” the watchdog agency said.

Hospital groups questioned how GAO came up with its results. They argued that the report didn't take into account that 340B hospitals may see sicker patients than other hospitals, and they said the GAO may have unfairly ignored other reasons for the higher spending, including that patients in non-340B hospitals more frequently receive drugs outside of hospitals.

“We're surprised not only by the lack of evidence and data for GAO's conclusions and recommendations, but also by its suggestion that physicians in our nation's essential hospitals would ignore patient needs to enrich hospitals,” Dr. Bruce Siegel, CEO of America's Essential Hospitals, said in a written statement.

Tom Nickels, a senior vice president at the American Hospital Association, agreed. “Simply put, the GAO report misses the mark,” he said.

A 340B hospital group called 340B Health said the GAO's study “only examined average difference in per-beneficiary spending by hospital type, and did not examine any patient differences in terms of outcomes or quality.”

The GAO stood by its methodology. Spokesman Chuck Young said that after carefully examining several factors that could affect Part B drug spending, including higher shares of low-income patients, his agency still found substantial differences in spending for 340B hospitals.

There were 1,039 disproportionate-share hospitals participating in the 340B Program as of May 31, 2013, according to congressional data. The program has been around since 1992 but was expanded when the Affordable Care Act allowed more providers to become eligible for the discount. The number of participants taking advantage of the discounts has since grown substantially.

The GAO report said overprescribing may be the way 340B hospitals “maximize” Medicare revenue. “While hospitals may be financially benefiting … this poses potentially serious consequences to the Medicare program and its beneficiaries,” it said.

The watchdog agency suggested Congress consider eliminating the incentive to prescribe more drugs, or more-expensive drugs, than necessary to treat Medicare beneficiaries at 340B hospitals.

Safety net providers and clinics that participate in the 340B program are scheduled to meet this week in Washington to address criticisms from drugmakers and others of the discount program.

An analysis released last year by Avalere Health and sponsored by the drug industry-backed advocacy group Alliance for Integrity and Reform, found that about two-thirds of 340B hospitals provide less charity care than the average U.S. hospital, with charity care making up 1% or less of total costs at a quarter of those facilities.

An analysis conducted by the Berkeley Research Group found that drug purchases made at the 340B price rose from $1.1 billion in 1997 to more than $7 billion by 2013, with projections of reaching more than $16 billion by 2020.

On the other hand, an analysis in May by healthcare consulting firm Dobson DaVanzo & Associates found that 340B hospitals provided nearly twice as much care to Medicaid and low-income Medicare beneficiaries as did hospitals not in the program.

The HRSA estimated the program saved providers about $3.8 billion in drug costs in 2013.