During National Pharmacy Week, Essential Hospitals Highlight Importance of 340B Drug Pricing Program

Susan Coultrip, MBA, ACE, 340B Compliance and Regulatory Senior Consultant
October 16, 2023

As we celebrate pharmacists’ critical contributions to improving patient care during National Pharmacy Week, October 15–21, essential hospitals have an opportunity to highlight the importance of the 340B Drug Pricing Program. While many pharmacists leverage this program at eligible hospitals, health systems, and practices nationwide, essential hospital leaders have a special responsibility to advocate for the program by sharing its tremendous value.

The 340B program began as part of the Veteran’s Health Care Act of 1992 thanks to tireless association advocacy. It allows covered hospitals and health systems to stretch scarce federal resources as far as possible to provide comprehensive health care to patients, families, and communities disproportionately affected by social, economic, and environmental disparities. The program requires drug manufacturers participating in Medicare and Medicaid to provide outpatient drugs to covered entities at significantly reduced prices.

340B Drug Pricing Program in the Crosshairs

Over time, a growing and negative misrepresentation of the program has trickled down from opposing parties into the news and broader public opinion. Now is our chance to turn this around and defend the program by educating our local political leaders and the public about the good 340B brings to our hospitals and neighbors.

“If we don’t defend the program, what we’ll see is resources that can now be invested in our community taken away from our essential hospitals and communities, and go into shareholder returns for drug companies,” says Bruce Siegel, MD, MPH, president and CEO of America’s Essential Hospitals. “The 340B program is very much in the crosshairs. We are facing a very well-funded, coordinated campaign coming from the pharmaceutical industry and manufacturers to curtail the program. Hospital leaders need to be utterly unapologetic about this program. It allows hospitals, nonprofits, and public charitable organizations to do things they couldn’t otherwise do.”

Since 2020, 26 drug manufacturers have imposed cuts to restrict the 340B program, and 10 cases were brought to court. Contract pharmacy restrictions that manufacturers placed on 340B hospitals have added to the problem, limiting eligible health systems from reinvesting this funding into improving their services and communities. The last three years have placed extraordinary strains on hospitals, and for many, the 340B program is critical to survival.

“In the wake of the pandemic, we are seeing huge challenges for health systems, especially our essential hospitals, around issues of labor costs,” says Siegel. “Many health systems are seeing huge budgetary pressures with tens of millions of dollars per year in extra unbudgeted expenses to cover added labor costs.”

Despite these barriers, hospitals are obligated to treat every patient in their emergency department, many of whom are uninsured or on Medicaid, which means hospitals are paid much less to provide this care. In fact, more than 33 percent of hospitals are operating on negative margins. Kaufman Hall, a consulting firm tracking hospital financial statistics, found that by the end of 2021, total hospital expenses were up 11 percent, compared with pre-pandemic levels in 2019.

Without 340B program savings, many hospitals would need to lay off workers and close needed services, such as those that help to detect and treat patients suffering from chronic conditions. Consequently, underserved populations will need to travel further away to receive health care.

From a manufacturer standpoint, fewer than 7.2 percent of the overall U.S. drug market sales in 2021 were from the 340B program.

“The pharmaceutical industry routinely generates over 20 percent operating margins,” says Siegel.

Yet, we see financially distressed hospitals making the difficult decision to cut essential services every day.

How Essential Hospitals Can Use the 340B Program as Intended

Beyond employee expense, prescription drugs are one of hospitals’ main expenses, and this number continues to climb every year. Hospitals participating in the 340B program can save an average of 25 to 50 percent on pharmaceutical medications.

The best way for a 340B covered entity to optimize its program is to take advantage of network integrity by owning its own specialty pharmacy. This way, the hospital saves money on dispensing fees it otherwise would pay to the contracted pharmacies. This model alleviates financial burden while improving services and pharmaceutical benefits. Even financially challenged hospitals can recover funds quickly while reducing burden on staff and improving patient outcomes. Most important, the increase in manufacturer restrictions on specialty pharmacies makes owning your own specialty pharmacy a critical step toward maximizing savings.

Clearway Health infographic that reads "Impact of In-house Specialty Pharmacy Services for 340B Eligible Health Systems. Contract Pharmacy vs. In-house Specialty Pharmacy. There is 34% greater financial opportunity for healthcare organizations when specialty medications are filed at an on site pharmacy. These additional savings are vital for hospitals to continue investment in programs that enhance patient services and access to care.

This example shows the difference in cost that a health system will spend when filling the same drug through a contract pharmacy versus their owned specialty pharmacy. The improved margin opportunity for health systems who choose to own their own pharmacy is significant while providing an expanded service to patients in a familiar care setting.

For in-house pharmacies to succeed, essential hospitals must drive prescriptions to these pharmacies, which requires an investment in resources. It’s that network integrity that will help insulate them from the manufacturers’ actions, and partnering with a company like Clearway Health will help them do this successfully.

Using revenue created by the specialty pharmacy program, hospitals have met community needs by opening trauma centers and food pantries improving substance use disorder services, offering hepatitis C testing and treatment, establishing clinical pharmacy programs, helping patients afford medications, and creating housing and educational opportunities. These are the stories we need to share.

During National Pharmacy Week, we encourage essential hospital staff to tell local political leaders what the program means to their hospital and what will happen if further restrictions are implemented or the program ends. Sharing more stories and opinion pieces on the 340B program’s benefits and its tremendous effect on patients and communities also can help demystify misconceptions and align key stakeholders in the effort to defend it.

“We need to defend the program aggressively and assertively,” Siegel says.

To read the full published article in America's Essential Hospitals' blog, Essential Insights, click here.