Are 340B Discount Drug Savings Passed on to Patients?

Diana J. Smith
340B drug discount program faces uncertainties amid HRSA silence | Modern  Healthcare

Eligible healthcare entities can stretch their federal dollars further by participating in the 340B Drug Pricing Program. First launched in 1992, the program is designed to provide direct savings on pharmaceutical purchases so that program participants can put the money into other things. Here is the million-dollar question: are drug savings passed onto patients?

Unfortunately, the answer is not as clear as the question. Federal regulations do not specify in detail how program participants, also known as covered entities, must spend the money they save through access to deeply discounted drugs. The law only specifies that the savings go toward expanding access to care among the poor and needy.

Offering Lower Prices to Patients

A March 2023 340B Drug Pricing Program fact sheet published by the American Hospital Association suggests that covered entities can use their savings in any number of ways. One possibility is to pass the savings along to patients at retail. We know that some covered entities do just that thanks to a lawsuit filed a couple of years ago in South Carolina.

The case hinged on how Genesis Healthcare defined a patient for the purposes of dispensing 340B drugs. When all was set and done, the court ruled that the government’s definition of a patient was far too narrow. As a result, covered entities can now dispense discounted drugs to more patients. Hopefully, they will pass discounts along accordingly.

Investing in Other Opportunities

The previously mentioned fact sheet also suggests that covered entities can reinvest the savings they enjoy under the 340B program in other ways that help the uninsured or underinsured. For example, a healthcare group could build a new hospital or clinic in a targeted area known to have a high percentage of qualifying patients.

A covered entity could also offer free healthcare services, expand existing services to reach more people, or do anything that would constitute increasing access to care among those in need. It would seem that most of the time covered entities are using their savings appropriately. But there have been instances in which covered entities have been found pocketing the savings.

Documenting How Money Is Spent

In order to maintain program compliance, covered entities are required to document all of the drugs they purchase. They are not required to document how they divert their savings, though doing so is smart. If a covered entity is ever audited, documenting how saving are spent can only help. Audits are supposed to guarantee that program participants are living up to the expectations and ideals of the 340B Drug Pricing Program.

Compliance is not as easy as it sounds. In addition, audits can be difficult to manage. For that reason, 340B drug pricing consultants like Ravin Consultants recommend conducting mock audits. Consulting firms even help their clients develop and run the audits in preparation for the real thing.

Manufacturer Accusations of Abuse

In recent years, drug manufacturers have frequently accused covered entities of abusing the 340B program to increase their own profits. Program advocates have vehemently denied the accusations as expected. However, there is some evidence in support of the manufacturers’ argument.

For instance, a study done in 2015 provides ample evidence that not all covered entities are using their program savings to increase healthcare access among the needy. And even now, a well-known healthcare group is being investigated by Congress for potential program abuse.

Savings achieved through the 340B Drug Pricing Program can be passed on to patients who purchase the discounted drugs at retail. But savings can be used in other ways, too. Regardless, savings must go back into providing healthcare to the uninsured and underinsured.

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