340B program represents 6% or more of US pharma market

The 340B program, which dates back to 1992, was set up to enable certain hospitals and healthcare providers to purchase drugs at a discount, while obtaining the nominal full value of the drug from HHS. the margin betweeen the two is nominally supposed to support care for the indigent, but is not required to be spent that way. Through a variety of industry and policy changes, the program has now grown into something of a health system monster, with thousands of healthcare sites designated as eligible "covered entities," and with the volume of purchases made through the program growing by double-digit rates.

Now, Adam Fein, president of Pembroke Consulting and industry blogger at DrugChannels.net, is reporting that 340B purchases in 2017 totaled $19.3 billion in 2017, up by 19% over the previous year (which is actually somewhat slower growth; the average growth rate has been 29% since 2014). That represents 6% of the entire US pharma market (there are other estimates that put it even higher; Fein says that the 6% figure almost certainly underestimates the proportion). Pharma manufacturers are not obligated to participate in the program, but if they want their drugs to be eligible for any Medicaid reimbursement, they are compelled to do so.

Health provider advocates have long claimed that the revenues obtained from aggressive 340B discounting enable them to cover "uncompensated care" for the poor or needy. But Fein also reports that the volume of uncompensated care has dropped from $45.9 billion in 2012 to $38.3 billion in 2016 (the latest year for which data are available). ("Uncompensated care" covers a lot of things besides drug costs; the point here is one trend is going up while the other is going down.)

It could be argued that pharma companies losing out on some of their reimbursement is a "so what?" situation, but the 340B program causes a variety of dislocations in healthcare funding. In particular, an eligible cancer center can take advantage of the discount, while many community oncologists cannot; this is one of the reasons that nonaffiliated oncologists are becoming rarer and rarer in the US, even though the cost of care at community oncology offices is generally less expensive than at health systems. There has been an ongoing debate on whether the 340B should be changed, but so far, no direct action has been taken.