I think you are missing the mark here. The 340B program subsidizes not for profit urban/rural hospitals cancer/infusion service lines. Also, not all drugs are 340b eligible. In fact, I think you'd be surprised at what drugs are not 340b eligible. Every day the drug manufacturers remove more and more drugs from 340b eligibility.
An overwhelming majority of cancer patients are over the age of 65 (Medicare Reimbursement is the driver). The barometer for any business, especially an oncology/infusion treatment center is that the drug cost must be less than the Medicare Reimbursement for that drug. One of the most highly utilized drugs right now for cancer patients is Keytruda. Keytruda is NOT 340b eligible. Magically, it costs just under the reimbursement that Medicare pays. Also consider the ever-growing popularity of the Medicare Replacement plans that cater to patients on a fixed income. They are marketed as the same as Medicare for less. They cost those on Medicare less each month...until they use it and the Medicare Replacements put a majority of the infusion treatment payment...on the individuals on a fixed income and a lot of them do not pay their co-pay/deductible....but no cancer ever turns away a cancer patient who's in treatment because they're in bad debt status. Oh, and the previous few sentences assume that the insurance companies don't pull any of their denial tricks either...and I think you know a thing or two about that.
340b programs with their deep discounts offset these breakeven/loss patients/drugs. Look at Remicade. It's used for several treatments, particularly Crohn's disease. What makes Remicade particularly fascinating is that it's considered an Orphan drug in the eyes of 340b. Meaning that Critical Access Hospitals (who are automatically in 340b) do not get the 340b discounts attributed to this drug but the big urban/rural 340b eligible hospitals do get the discount. Last time I looked a few years ago, Remicade cost on average approximately $600 per infusion for a 340b hospital with Medicare reimbursement around $5,000. Great deal, right? Remicade cost Critical Access Hospitals, For Profit Hospitals and non 340b hospitals $5,500, with Medicare Reimbursement at $5,000. So guess what happens once hospitals realize this? No more Remicade infusions and patients now have to go elsewhere. If the overall mix of drug cost (via GPO pricing, etc.) is more than organizations receive in reimbursement, health systems are forced to have a hard discussion about cancer/infusion services. Many smaller hospitals across the country have stopped offering these services all together....but no one really talks about that do they?
Aside from this there's also several conversations being had today connecting the dots between Average Sales Price (ASP), pharmacy PBMs and Rebates from drug manufacturers. If you peel back this onion, I think you'll find a much better reason behind the skyrocketing drug prices.
I really appreciate the thoughtful comment Matt! Fair point, this article did not spend too much time focused on the benefits of 340B, of which there are many. Unfortunate that many of the beneficial and well intentioned programs in healthcare are leveraged to the benefit of a few. And yes, 340B is not THE reason for rising drug prices. I see PBMs as one of the most harmful entities in drug access and affordability right now. Again - thanks for the comment! I appreciate learning from your perspective and experience.
This is an outstanding analysis! I was at an academic CEO meeting and one CEO said I run a $300M pharmacy with beds. This was addressing the profit they made off their 340B program. However, I must point out that the 340B program is a lifeline for many safety nets who take care of a disproportionate share of Medicaid patients. Some of these hospitals are creating their own PBMs to be able to pass 340B pricing directly to their patients. See the model created by Rescription,
I think you are missing the mark here. The 340B program subsidizes not for profit urban/rural hospitals cancer/infusion service lines. Also, not all drugs are 340b eligible. In fact, I think you'd be surprised at what drugs are not 340b eligible. Every day the drug manufacturers remove more and more drugs from 340b eligibility.
An overwhelming majority of cancer patients are over the age of 65 (Medicare Reimbursement is the driver). The barometer for any business, especially an oncology/infusion treatment center is that the drug cost must be less than the Medicare Reimbursement for that drug. One of the most highly utilized drugs right now for cancer patients is Keytruda. Keytruda is NOT 340b eligible. Magically, it costs just under the reimbursement that Medicare pays. Also consider the ever-growing popularity of the Medicare Replacement plans that cater to patients on a fixed income. They are marketed as the same as Medicare for less. They cost those on Medicare less each month...until they use it and the Medicare Replacements put a majority of the infusion treatment payment...on the individuals on a fixed income and a lot of them do not pay their co-pay/deductible....but no cancer ever turns away a cancer patient who's in treatment because they're in bad debt status. Oh, and the previous few sentences assume that the insurance companies don't pull any of their denial tricks either...and I think you know a thing or two about that.
340b programs with their deep discounts offset these breakeven/loss patients/drugs. Look at Remicade. It's used for several treatments, particularly Crohn's disease. What makes Remicade particularly fascinating is that it's considered an Orphan drug in the eyes of 340b. Meaning that Critical Access Hospitals (who are automatically in 340b) do not get the 340b discounts attributed to this drug but the big urban/rural 340b eligible hospitals do get the discount. Last time I looked a few years ago, Remicade cost on average approximately $600 per infusion for a 340b hospital with Medicare reimbursement around $5,000. Great deal, right? Remicade cost Critical Access Hospitals, For Profit Hospitals and non 340b hospitals $5,500, with Medicare Reimbursement at $5,000. So guess what happens once hospitals realize this? No more Remicade infusions and patients now have to go elsewhere. If the overall mix of drug cost (via GPO pricing, etc.) is more than organizations receive in reimbursement, health systems are forced to have a hard discussion about cancer/infusion services. Many smaller hospitals across the country have stopped offering these services all together....but no one really talks about that do they?
Aside from this there's also several conversations being had today connecting the dots between Average Sales Price (ASP), pharmacy PBMs and Rebates from drug manufacturers. If you peel back this onion, I think you'll find a much better reason behind the skyrocketing drug prices.
I really appreciate the thoughtful comment Matt! Fair point, this article did not spend too much time focused on the benefits of 340B, of which there are many. Unfortunate that many of the beneficial and well intentioned programs in healthcare are leveraged to the benefit of a few. And yes, 340B is not THE reason for rising drug prices. I see PBMs as one of the most harmful entities in drug access and affordability right now. Again - thanks for the comment! I appreciate learning from your perspective and experience.
Thanks for the shout out, Preston!
Thanks for teaching me and other so much! Hope I did it justice.
Preston,
This is an outstanding analysis! I was at an academic CEO meeting and one CEO said I run a $300M pharmacy with beds. This was addressing the profit they made off their 340B program. However, I must point out that the 340B program is a lifeline for many safety nets who take care of a disproportionate share of Medicaid patients. Some of these hospitals are creating their own PBMs to be able to pass 340B pricing directly to their patients. See the model created by Rescription,
Thank so much! I totally agree. 340B does help organizations as it was originally designed to do. The regulatory capture has just gotten out of hand.