340B prices Medicaid $32b per yr – Healthcare Economist

The 340B Drug Pricing Program is a federal initiative designed to assist sure healthcare suppliers, referred to as “lined entities,” stretch their assets to higher serve susceptible and underserved affected person populations. Created in 1992, this system requires pharmaceutical producers to promote outpatient medicine at considerably discounted costs (sometimes 25% to 50% off) to eligible hospitals, clinics, and Health facilities that take care of a lot of uninsured and low-income sufferers. These covered entities can then use the savings from these discounted drug purchases to provide more comprehensive services, reach more eligible patients, and offer additional programs that enhance patient care and access in their communities. Proponents of the 340B program declare that IT improves entry to take care of underserved populations with out utilizing taxpayer cash (since all funding comes from obligatory reductions from drug producers).

Whereas the 340B program was focused to lined entities treating underserved populations, lately the dimensions of this system has grown. In response to a report by Masia (2024), the variety of hospitals taking part in 340B has elevated by 31% within the final decade. Whereas this will look like a big quantity, every grantee now could be extra more likely to broaden their attain by working quite a few sub-sites or sub-grantees. Utilizing this definition, hospital websites elevated by 126% (grantee website elevated by 61%) over the past decade. There are actually practically 200,000 340B contract pharmacies within the US.

Masia then examines the influence of 340B on Medicaid price:

Our regression estimates counsel that the rise in 340B hospital and grantee participation from 2014 to 2021 elevated total Medicaid spending by $391 per enrollee, or over $32 billion per yr. This means that 340B-driven spending might account for roughly 10% of total Medicaid spending, considerably growing the price of this system to taxpayers.

Why would 340B enhance price? The creator posits that 340B-driven market consolidation, website of care alternative, alternative of remedy may all be impacting the outcomes. As an example, 340B hospitals might choose to prescribe branded as in comparison with generic drugs beneath 340B for the reason that revenue they make off branded medicine is far bigger. Whereas 340B lined entities get reductions for these medicine, payers reimburse the lined entities at full price.

You may learn Neal Masia’s full paper here.