MedPAC Finds No Clear Link Between 340B Program and Increased Drug Spend

23 Jan 2020

On January 17, 2020, the Medicare Payment Advisory Commission (MedPAC) held its first meeting of the year, including a session discussing a report requested by the House Energy and Commerce Committee on whether the 340B program creates incentives for participating hospitals to use more expensive drugs and, if so, whether there is a corresponding impact on patient cost-sharing. MedPAC’s analysis, which focused on cancer drug spending for five major cancer types, found no conclusive evidence that the 340B program’s discounts incentivized increased drug spending. There was some evidence of statistically higher spending on cancer drugs to treat lung and prostate cancer at 340B hospitals, but the Commission noted that these effects were likely not generalizable to other conditions.  Moreover, the Commission stated that there was no identifiable link between those increases and incentives from the 340B program. The full results of the analysis will be published in MedPAC’s March 2020 report, and the slides presenting the initial results can be found here. A summary of the Commission’s conclusions and comments from the MedPAC Commissioners is below.

  • Higher spending at 340B hospitals was not attributable to any program incentives. The Commission’s analysis considered average cancer drug spending per month across Medicare Parts B and D for breast, colorectal, prostate and lung cancer, as well as leukemia and lymphoma, and relied on data preceding the 2018 reduction in Medicare Part B payments for 340B drugs.  MedPAC found that average spending by cancer type at 340B hospitals ranged from 2-5% higher compared to non-340B hospitals and from 1% lower to 7% higher compared to physician offices. 340B hospitals in the study were more likely to be larger, to be teaching hospitals, and to treat patient populations that were younger, more disabled, and more frequently eligible for discounted cost-sharing for Part D drugs. The analysis also found no consistent pattern in changed spending behavior for hospitals that were newly eligible for 340B, suggesting that the discounts in the program did not incentivize hospitals to change their practices. The Commission was unable to define any link between increased spending and 340B incentives and suggested the reason for higher spending appeared to be specific to the type of cancer.
  • Potential Impact of Hospital-Employed Oncologists on Spending. Several commissioners (Kathy Buto, Lawrence Casalino, Warner Thomas, and Vice Chair Paul Ginsburg) discussed whether there might be an additional, unexamined impact on program spending with increased employment of oncologists on hospital staff. Specifically, they wondered if the 340B program could lead hospitals to hire more oncologists (with a resulting increase in Medicare facility fees) and contribute to the shift in cancer care from physician offices to hospital outpatient departments.  Jim Matthews, MedPAC Executive Director, agreed that staff would examine the issue and raise it as a possibility in the March report, but clearly stated that the Commission did not currently have any data to support such a conclusion.
  • Additions to the March Report. Commissioner Warner Thomas requested that staff include a note in the final report explaining that the MedPAC study had no data about the severity of cancers included in the analysis, and suggesting that increased spending could also be driven by more severe cancers. Commissioner Bruce Pyenson requested a summary section outlining the cash flow process for 340B hospitals compared to non-340B hospitals. Finally, Commissioner Amol Navathe asked staff to evaluate whether new 340B hospitals tended to engage in any consolidation activity before they gained 340B status.

Covered entities are hopeful that the impartial MedPAC study will put to rest previously publicized allegations that the 340B program results in higher drug spending by 340B covered entities.  Powers will report on the final MedPAC report when it is released in March.

Category: Drug Pricing

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