For 25 years, the 340B drug savings program, at no cost to the government, has enabled eligible hospitals to purchase certain outpatient drugs from pharmaceutical manufacturers at discounted prices. This allows the participating hospitals to use the savings from the discounts to provide an expanded range of comprehensive health services to their local communities, such as increased access to care, clinical pharmacy services, community outreach programs, free vaccines and to fund oncology services for cancer patients. Despite the many benefits of the program, the Centers for Medicare & Medicaid Services recently finalized a 30 percent payment cut to many hospitals participating in 340B starting January 1, 2018. This cut will have a dramatic impact on these 340B hospitals’ ability to improve access to care in their communities and will not help lower the cost of prescription drugs, despite the claims made by opponents of the program.

Some have incorrectly claimed that the 340B program is hurting cancer patients by driving consolidation in the oncology field. The reality is that larger market forces have influenced independent oncology practices to merge with their community hospitals. In an effort to better coordinate patient care and improve quality and efficiency, hospitals are strengthening linkages to each other, and to physicians. Unlike independent oncology practices, hospitals provide for all patients who seek care, regardless of their insurance status or ability to pay. In addition, hospitals treat cancer patients requiring services that are more complex and treat all Medicare and Medicaid patients, which is not the case for private practice oncology clinics.

One example of a hospital that has been able to increase patient services and access to oncology care because of the 340B program is Providence Cancer Center in Portland, Oregon. Kevin Olson, MD, oncologist and the executive director of the Providence Cancer Center, said, “Prior to our participation in the 340B program we experienced drug cost increases between 10 and 15 percent each year, which threatened our ability to maintain even basic infusion services in our cancer infusion program. As a result of savings from 340B in the last two years, we were able to significantly expand our social work and spiritual care services while continuing to provide infusion services for the uninsured and marginally insured patients referred to us from our private practice medical staff members. The proposed cuts in reimbursement will create pressures that will again force us to choose which unreimbursed services will be cut back or eliminated.”

The Administration has claimed this policy will reduce the cost of drugs for seniors. In reality, this policy change will do very little to reduce the cost of care for many seniors, and would actually cause increases in some Medicare beneficiaries’ out-of-pocket costs. Additionally, the drastic cuts in payments to 340B hospitals would certainly reduce their ability to support programs that enhance patient services and access to care that currently benefit low-income Medicare beneficiaries, both financially and with regard to their health and wellness. 

CMS also states that “the current payment methodology may lead to unnecessary utilization and potential overutilization of separately payable drugs.” However, our data do not support this concern, and in fact contradict it, showing that 340B hospitals utilize separately payable drugs in the same manner as other hospitals. Our data also show that increases in drug prices – not utilization – are largely to blame for increases in Part B drug expenditures. Instead of targeting hospitals that serve vulnerable populations, CMS should instead take direct action to halt the unchecked, unsustainable increases in the cost of drugs.

The 340B program constitutes less than 2.8 percent of the $457 billion in annual U.S. drug purchases and achieves savings for hospitals to use to bolster services for vulnerable patients and communities at no cost to the government. Scaling back the 340B program would only benefit drug companies and create devastating consequences for the patients and communities who rely on this vital program. This program must be protected so that hospitals can continue to provide quality care and services for communities serving the neediest patients.