The 340B drug discount program: hospitals generate profits by expanding to reach more affluent communities

Abstract

The federal 340B program gives participating hospitals and other medical providers deep discounts on outpatient drugs. Named for a section of the Veterans Health Care Act of 1992, the program's original intent was to help low-income and uninsured patients. But the program has come under scrutiny by critics who contend that some hospitals exploit the drug discounts to generate profits instead of either investing in programs for the poor or passing the discounts along to patients and insurers. We examined whether the program is expanding in ways that could maximize hospitals' ability to generate profits from the 340B drug discounts. We matched data for 960 hospitals and 3,964 affiliated clinics registered with the 340B program in 2012 with the socioeconomic characteristics of their communities from the US Census Bureau's American Community Survey. We found that hospital-affiliated clinics that registered for the 340B program in 2004 or later served communities that were wealthier and had higher rates of health insurance compared to communities served by hospitals and clinics that registered for the program before 2004. Our findings support the criticism that the 340B program is being converted from one that serves vulnerable patient populations to one that enriches hospitals and their affiliated clinics.

Keywords: Hospitals; Medicare; Pharmaceuticals.

Exhibit 1

Numbers Of Disproportionate-Share Hospitals And Their Affiliated Outpatient Clinics In The 340B Program, 1992–2012 SOURCE Authors’ analysis of data from the 340B provider list maintained by the Office of Pharmacy Affairs in the Health Resources and Services Administration.

Exhibit 2

Socioeconomic Characteristics Of Communities Served By 340B Disproportionate-Share Hospitals And Served By Hospital-Affiliated Outpatient Clinics Compared To Communities In All US ZIP Code Tabulation Areas SOURCE Authors’ analysis of data from the 340B provider list maintained by the Office of Pharmacy Affairs in the Health Resources and Service Administration; US Census Bureau’s American Community Survey demographic and housing estimates, 2012; and US Census Bureau’s Small Area Health Insurance Program, August 2013. NOTES Percent unemployed, uninsured, and below federal poverty level relate to the left-hand y axis. Household income relates to the right-hand y axis.

Exhibit 3

Socioeconomic Characteristics Of Communities Served By Disproportionate-Share Hospitals And By Hospital-Affiliated Outpatient Clinics, By Time Of Registration For The 340B Program SOURCE Authors’ analysis of data from the 340B provider list maintained by the Office of Pharmacy Affairs in the Health Resources and Service Administration; US Census Bureau’s American Community Survey demographic and housing estimates, 2012; and US Census Bureau’s Small Area Health Insurance Program, August 2013. NOTES Percent unemployed, uninsured, and below federal poverty level relate to the left-hand y axis. Household income relates to the right-hand y axis. Communities with clinics that registered for the 340B program both before 2004 and later had unemployment rates of less than 1 percent.

Exhibit 4

Socioeconomic Characteristics Of Communities Served By Hospital-Affiliated Clinics In Comparison To Characteristics Of Communities Served By Disproportionate-Share Hospitals, By Time Of Registration For The 340B Program SOURCE Authors’ analysis of data from the 340B provider list maintained by the Office of Pharmacy Affairs in the Health Resources and Service Administration; US Census Bureau’s American Community Survey demographic and housing estimates, 2012; and US Census Bureau’s Small Area Health Insurance Program, August 2013. NOTES The figure shows how communities served by clinics compared to those served by hospitals. For example, the unemployment rate in communities served by clinics that registered before 2004 was 23 percent greater than the unemployment rate in communities served by hospitals that registered before 2004. In contrast, the rate in communities served by clinics that registered later was 61 percent less than the rate in communities served by hospitals that registered later.