Consequences of the 340B Drug Pricing Program

Abstract

Background: The 340B Drug Pricing Program entitles qualifying hospitals to discounts on outpatient drugs, increasing the profitability of drug administration. By tying the program eligibility of hospitals to their Disproportionate Share Hospital (DSH) adjustment percentage, which reflects the proportion of hospitalized patients who are low-income, the program is intended to expand resources for underserved populations but provides no direct incentives for hospitals to use financial gains to enhance care for low-income patients.

Methods: We used Medicare claims and a regression-discontinuity design, taking advantage of the threshold for program eligibility among general acute care hospitals (DSH percentage, >11.75%), to isolate the effects of the program on hospital-physician consolidation (i.e., acquisition of physician practices or employment of physicians by hospitals) and on the outpatient administration of parenteral drugs by hospital-owned facilities in three specialties in which parenteral drugs are frequently used. For low-income patients, we also assessed the effects of the program on the provision of care by hospitals and on mortality.

Results: Hospital eligibility for the 340B Program was associated with 2.3 more hematologist-oncologists practicing in facilities owned by the hospital, or 230% more hematologist-oncologists than expected in the absence of the program (P=0.02), and with 0.9 (or 900%) more ophthalmologists per hospital (P=0.08) and 0.1 (or 33%) more rheumatologists per hospital (P=0.84). Program eligibility was associated with significantly higher numbers of parenteral drug claims billed by hospitals for Medicare patients in hematology-oncology (90% higher, P=0.001) and ophthalmology (177% higher, P=0.03) but not rheumatology (77% higher, P=0.12). Program eligibility was associated with lower proportions of low-income patients in hematology-oncology and ophthalmology and with no significant differences in hospital provision of safety-net or inpatient care for low-income groups or in mortality among low-income residents of the hospitals' local service areas.

Conclusions: The 340B Program has been associated with hospital-physician consolidation in hematology-oncology and with more hospital-based administration of parenteral drugs in hematology-oncology and ophthalmology. Financial gains for hospitals have not been associated with clear evidence of expanded care or lower mortality among low-income patients. (Funded by the Agency for Healthcare Research and Quality and others.).

Figure 1.. 340B Program–Related Discontinuities in Hospital Ownership of Physician Practices and Part B Drug Administration per Year, According to Specialty.

For each specialty, the number of physicians in hospital-owned practices and the number of hospital Part B drug claims per year areplotted according to the Disproportionate Share Hospital (DSH) adjustment percentage in the previous year, which determines 340B Program eligibility. Hospitals were categorized on the basis of their DSH percentage into 1-percentage-point bins, excluding hospitals within 1 percentage point of the eligibility threshold of 11.75%. Unadjusted bin means were calculated and plotted, with hospital size (in beds) used to weight hospital contributions to the mean. For illustrative purposes, a line of best fit to the bin means (darker blue lines) is shown to either side of the threshold, with 95% confidence intervals (lighter blue lines). The red vertical line denotes the threshold for 340B Program eligibility at a DSH percentage of 11.75%. Similar scatter plots of the numbers of patients served in hospital-owned practices and the proportion of patients served who were dually eligible by specialty across hospital DSH percentages are shown in Figure S4 in the Supplementary Appendix.