Dr. Robinson Reveals 340B Programs’ Effect on Drug Pricing

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TL/DR –

A study published in The New England Journal of Medicine analyzed how insurer drug expenditures on infused drugs affected price markups in hospitals. The research revealed that the 340B drug pricing program, initially designed to provide medications to low-income patients, has become a significant revenue stream for hospitals. The study has implications for insurance companies who pay higher reimbursement prices to hospitals and are trying to encourage patients to receive care outside of hospital settings.


Insurer Drug Expenditures Influencing Price Markups

In The New England Journal of Medicine, an analysis was published in January by James Robinson, PhD, MPH, and his team on the impact of insurer drug costs on price markups at hospitals for patients with cancer, inflammatory diseases, or blood-cell deficiency disorders. The study used 2020 to 2021 Blue Cross Blue Shield data and observed how costs differed between 340B Drug Pricing Program–eligible hospitals, ineligible hospitals, and independent physician practices.

Need for Commercial Insurance Reforms

Robinson discusses the need for reforms in commercial insurance that reflect Medicare changes under the Inflation Reduction Act (IRA). He pointed out how the 340B drug pricing program has substantially strayed from its original objective of supplying necessary medications to low-income patients, and discussed the ongoing struggles with cost sharing among patients, insurers, hospitals, and drug manufacturers.

Medicare vs. Private Sector Pricing

Robinson emphasized on the stark difference between Medicare and private sector pricing. While Medicare only provides a markup of 6% over average sales price (ASP), markups in the private sector can go up to 200% or 300%. He stressed on the need for reforms similar to Medicare in the commercial-insured population.

Policy Proposals and Ethics

The overexpansion of the 340B program and site-of-care pricing were discussed as potential policy issues. The 340B program has turned into a significant revenue stream for hospitals, including those treating mostly nonpoor people. Further, hospitals charge significantly more than independent physicians and other providers for similar services and drugs.

Impact on Negotiation Strategies

The findings of this study could influence the negotiation strategies of 340B hospitals, community oncology practices, and pharmaceutical firms in drug pricing. The main implications are for insurance companies, who are paying reimbursement prices significantly higher than the hospitals’ acquisition price. Insurers are trying to encourage patients to seek care outside of hospital clinics due to these high costs.

However, this introduces potential problems such as increased travel for patients and the risk of patients not getting their drugs due to high cost sharing and prior authorization burdens.


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