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  • Washington Highlights

    GAO Issues Report on 340B Drug Pricing Program

    Tannaz Rasouli, Sr. Director, Public Policy & Strategic Outreach
    Jason Kleinman, Senior Legislative Analyst, Govt. Relations

    The Government Accountability Office (GAO) July 6 issued a report on the 340B Drug Pricing Program. The report analyzes hospitals’ participation in the program by comparing 340B hospitals with non-340B hospitals in terms of financial and other characteristics, and examining how Medicare Part B drug spending at 340B hospitals compares to spending at non-340B hospitals.

    GAO found that 340B disproportionate share hospitals (DSH) were generally larger and more likely to be major teaching hospitals compared with non-340B hospitals. The report also finds that in comparison to non-340B hospitals, 340B DSH hospitals generally provided more charity care and uncompensated care.

    Additionally, the report finds that compared with non-340B hospitals, 340B DSH hospitals had lower overall financial margins. According to GAO, “The lower total facility margins among 340B DSH hospitals could be attributable, in part, to the tendency for 340B DSH hospitals to provide a larger amount of charity care and uncompensated care…compared with non-340B hospitals.”

    However, the report concludes that per beneficiary Medicare Part B drug spending, including oncology drug spending, was substantially higher at 340B DSH hospitals than non-340B hospitals, speculating that it may reflect a financial incentive for 340B hospitals to prescribe more drugs or more expensive drugs to Medicare beneficiaries.

    In its written comments, the Department of Health and Human Services (HHS) expressed concern that the GAO’s conclusion is not supported by the report’s methodology. HHS pointed out that GAO did not examine any patient differences in terms of outcomes or quality and argued “that higher volume of physician-administered drugs can lead to better clinical outcomes.”

    HHS also questioned GAO’s assertion that differences in patient health status were unlikely to explain the differences in Part B drug spending. The report characterizes the higher average risk score at 340B hospitals as “generally similar” to the lower scores at non-340B hospitals, while HHS indicates these differences “could represent a meaningful difference in the health status of beneficiaries.” The department argued that “further analysis of the differences in spending by risk score seems warranted.”

    The report was requested by Senate Finance Committee Chair Orrin Hatch (R-Utah), Senate Health, Education, Labor, and Pensions Committee Chair Lamar Alexander (R-Tenn.), Senate Judiciary Committee Chair Chuck Grassley (R-Iowa), House Energy and Commerce Health Subcommittee Chair Joe Pitts (R-Pa.), and Senator Mike Enzi (R-Wyo.).

    The Medicare Payment Advisory Commission (MedPAC) also recently released a report on the 340B program [see Washington Highlights, May 29].