May 14, 2019– Drug-industry consultant Adam Fein has released his annual analysis of the 340B program, painting an incomplete picture of the size and scope of the program. Fein claims in his Drug Channels blog that the 340B program “accounts for at least 7-to-8 percent of the total U.S. drug market […] yet hospitals’ charity care has dropped amid 340B program’s growth.”
Not only are Fein’s conclusions inconsistent with how reports from the government and independent academics have characterized the 340B program, but he ignores the many ways in which 340B hospitals care for low-income patients every day. Fein’s blog is incomplete in two important ways:
1. He focuses on 340B sales instead of discounts
Fein says the $24.3 billion in 340B sales in 2018 accounts for 7-8 percent of total drug spending. However, the true indicator of the program’s size is the total amount of 340B discounts manufacturers were required to provide to 340B covered entities. These discounts represent the money drug companies “lose” through participating in the 340B program.
In 2015, HRSA estimated that 340B sales were $12 billion, but that total 340B discounts were $6 billion. In assessing the size of 340B in 2015, researchers at the independent Pew Charitable Trusts found that 340B discounts were less than 2 percent of total drug spending and of manufacturer revenues. A similar study by Dobson-DaVanzo commissioned by 340B Health reached the same conclusion.
Given the large discrepancy in 340B sales and 340B discounts found in HRSA’s estimates for 2015, we expect the data to show a similar discrepancy between 340B sales and discounts in 2018. This would suggest that 340B discounts continue to be a small share of U.S. drug market.
2. He fails to paint a complete picture of the care hospitals provide to low-income patients
Fein fails to account for costs associated with providing unreimbursed care through Medicaid underpayments. A report by L&M Policy Research estimated 340B hospitals provided more than $26 billion in uncompensated and unreimbursed care in 2015. That amounts to 60 percent of all uncompensated and unreimbursed care in the U.S. that year even though they made up only 38 percent of acute care hospitals in the country.
A study by the American Hospital Association estimated the total Medicaid underpayments to hospitals was $22.9 billion in 2017. A separate survey of 340B hospitals found that 80 percent reported using their 340B savings to offset Medicaid underpayments. Collectively, these data indicate the importance of including unreimbursed care in providing a complete picture of the care hospitals provide to low-income patients.
Again, don’t take our word for it. In a report to Congress, the U.S. Government Accountability Office (GAO) found: “the median amounts of uncompensated care and total unreimbursed and uncompensated care provided by 340B hospitals were higher than the median amounts provided by non-340B hospitals.” A separate study published by independent academics in the Journal of the American Medical Association reached a similar conclusion.
The complete 340B picture
In the legal profession, there is saying among lawyers that “if you don’t like the answer, change the question.” In drawing his conclusions, Fein omitted key facts and research. Here’s the complete picture:
- 340B discounts, NOT sales, are the right way to measure the size of 340B because the figure represents the total amount of money manufacturers provide in discounts to 340B covered entities.
- 340B hospitals provide significantly more uncompensated and unreimbursed care than non-340B providers, demonstrating their commitment to treating low-income populations.
- 340B continues to be the “Little Engine That Could” by helping safety-net hospitals, health centers, and clinics around the country to better care for their patients with low incomes and those in isolated rural communities at no cost to taxpayers.
