A vital hospital revenue stream under threat

The 340B drug pricing program is a cornerstone for community-based health systems, allowing them to stretch limited resources and provide essential care to uninsured and underinsured patients. However, the program faces mounting challenges that hospital leaders cannot afford to ignore.

For Missionaries of Our Lady Health System, a 10-hospital system headquartered in Baton Rouge, La., the 340B program represents a crucial lifeline. 

"It's a program we've continued to take advantage of to support the costs we incur and don't get reimbursed for — the uninsured and underinsured within our community," Mr. Gleason said during a Becker's Healthcare Podcast episode. "It's worth approximately $150 million annually to our organization and has continued to grow at double-digit percentage rates over the last several years."

Established in 1992, the 340B program allows qualifying hospitals and clinics that treat low-income and uninsured patients to buy some drugs at a discounted rate of between 25% and 50% off their normal price. Community-based systems see the 340B program as a critical cost-saving measure but also as a strategic lever for improving patient care. 

"We focus on pharmacy management skills and medication therapy management to reduce pharmaceutical costs for patients in our managed care plans," Mr. Gleason said. "But it's very important for us to be able to get discounts on the cost of these drugs upfront to help treat these patients."

Sacramento-based UC Davis Health is another such system that relies on supplemental funding programs such as 340B to support the costs of its inpatient population — 42% of whom are Medicaid beneficiaries.

"We count on 340B revenue to help pay for all of that care for the poor," UC Davis Health CEO David Lubarsky, MD, said during an episode of the Becker's Healthcare Podcast. "I'm concerned, and I don't know if preparing is the word, that some of that will be curtailed under the new administration in an effort to balance the books against proposed tax cuts. Having said that, making sure that there are alternative streams of revenue to offset those potential cuts is critical."

Enrollment in the 340B program has spiked in recent years, driving up spending and leading to more disputes between covered entities that need to obtain affordable medications for uninsured or underinsured patients and drugmakers that aim to protect company profits and resources. 

The program's future is increasingly uncertain. 

Pharmaceutical companies are escalating their efforts to limit 340B discounts, calling for a move away from upfront discounts to offer rebates instead. Both Johnson & Johnson and Eli Lilly recently made moves to redesign the program, and sued the federal government when the Health Resources and Services Administration declared the changes illegal.

Lawmakers are also zeroing in on 340B as pharmaceutical companies push for changes. H.R. 8574, the 340B Affording Care for Communities and Ensuring a Strong Safety-net Act, was introduced in the House of Representatives last year and would limit 340B beneficiaries. 

One provision in the bill would remove 75% of urban 340B disproportionate share hospitals from the program. Another would require rural hospitals to have 60% of annual inpatient discharges be from those living outside of metropolitan statistical areas, according to an American Hospital Association analysis.

The proposed bill would significantly cut the 340B program and undermine its purpose, according to the AHA. "Drug companies should not be rewarded for intentionally undercutting the program and spreading misinformation about it in an effort to abrogate their 340B responsibilities," the association wrote in a recent letter to Congress.

Amid growing regulatory threats and industry pressures, safeguarding the future of the 340B program will require a coordinated effort from hospital leaders, policymakers and stakeholders across the healthcare sector.

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