The 340B Drug Pricing Program

Just over thirty years ago, Congress created the 340B Drug Pricing Program to help vulnerable patients access the medications they need. Under the program, biopharmaceutical manufacturers provide discounted medications to hospitals, community health centers and other types of health care providers that serve a significant number of low-income, uninsured, or otherwise underserved patients. These “340B covered entities” are expected to reinvest the savings accrued from the program to help patients access discounted medications and to expand available charity care for the communities they serve.

Unfortunately, the 340B program has strayed from its original mission. Instead of helping vulnerable patients access essential discounted medications and care, some 340B entities are profiting significantly from the program’s discounts without reinvesting the savings or providing necessary charity care. A key issue is that hospitals and other 340B care providers contract directly with pharmacies to dispense 340B discounted drugs. Many of these pharmacies are owned by pharmacy benefit managers (PBMs), which manage prescription drug benefits for health insurance companies. Rather than ensuring discounts are passed onto patients, PBMs are exploiting the 340B program to increase their profits. PBMs acquire as many 340B contracts as possible, including mail order and out-of-state pharmacies, and leave patients to continue paying high prices while they pocket the discounts.

The average profit margin earned by PBMs and large pharmacy chains on commonly dispensed 340B medicines is an estimated 72% vs. a margin of 22% for non‐340B medicines dispensed through independent pharmacies. Due to lack of necessary guardrails and program oversight, 340B continues to grow larger and larger and is now the second largest prescription drug program, behind only Medicare Part D.

It’s clear that the 340B program has veered far past its original intent. Help us urge Congress to increase transparency and oversight into 340B and return the program to its intended purpose of helping vulnerable patients access their medicines.

Learn more about the implications of 340B here.

Pharmacy Benefit Managers

Florida patients, particularly those living with chronic conditions, require consistent and reliable access to health care in order to manage symptoms and treat their illness. However, many health insurers and PBMs are coming between patients and the medications they need by driving up prices for their own bottom line.

PBMs manage the prescription drug benefits of health insurance companies. They decide which therapies health plans cover—and assign restrictions and out-of-pocket costs for insured consumers.

PBM decisions are often based not on what’s in the best interest for Florida patients, but on what’s best for health plans in the name of cost containment. PBMs are for-profit businesses that pocket much of the negotiated discounts and rebates, while passing any cost savings onto the health plans they represent, rather than to the patients struggling to afford the care they need.

Luckily, Gov. DeSantis signed legislation that places restrictions on these industry middlemen and improves transparency into PBM practices to help patients access and afford the care they need. This is an important step in helping Florida patients get the care they need when they need it.

GLOSSARY

340B Drug Pricing Program: The 340B Drug Pricing Program is a federal safety-net program created to help vulnerable patients access medications by biopharmaceutical companies providing discounts to 340B covered entities, which includes certain eligible hospitals, community health centers, other types of health care providers that serve low-income and underserved communities.

340B Eligible Patient: Any patient of a 340B covered entity is eligible to receive discounted drugs the 340B program.

Charity Care: Free or discounted medically necessary healthcare that hospitals offer to patients who cannot afford to pay for treatment otherwise. This includes both inpatient and emergency room services.

Copay: A fixed cost that patients pay toward medications and health care. Insurers cover the difference between that payment and the total cost.

Copay Accumulator: Copay accumulator adjustment programs are insurance policies that refuse to count the value of copay assistance, such as manufacturer coupons, toward a patient’s deductible.

Coinsurance: A percentage of the total cost patients must pay toward medications and health care, often ranging between 30 and 50 percent of the total treatment cost. High coinsurance payments are likely to catch patients off guard at the pharmacy counter.

Contract Pharmacy: A pharmacy that dispenses 340B prescription drugs to eligible patients outside of a 340B hospital or community clinic. These pharmacies, often run by PBMs, are able to profit by dispensing discounted medicine.

Pharmacy Benefit Manager: Third party companies that manage prescription drug programs for insurance companies, large employers, Medicare Part D drug plans, and other payers. PBMs negotiate discounts and rebates on medicine and develop formularies that determine what medicines are covered by certain insurances. PBMs also own many of the pharmacies that contract with 340B entities and dispense 340B discounted drugs.

Specialty Medicine: Innovative medications that treat complex and/or chronic medical conditions. As insurers increasingly shift cost burdens onto patients with these conditions, the out-of-pocket costs for specialty medicines can become prohibitive.

Specialty Tiers: Insurance companies have traditionally organized their formularies – the lists of the drugs that they cover – into three tiers, with copays/out-of-pocket costs corresponding with each tier. Now, however, insurers are increasing the out-of-pocket costs by utilizing specialty tiers – higher formulary levels which require coinsurance rather than a fixed, manageable copay. The out-of-pocket costs for specialty tier drugs can be hundreds or even thousands of dollars for even a 30-day supply.

Adverse Tiering: The practice in which health insurers move all available medications (even generics) prescribed for certain conditions to the highest specialty tier, resulting in higher out-of-pocket costs associated with access. This process pushes treatment out of financial reach for entire patient populations – especially if they are diagnosed in the middle of their health plan’s year when they have no other options but to remain on their current plan.

There are indications that adverse tiering is intended to drive patients with chronic disease onto other health plans – a motive which not only discriminates against entire patient populations, but also makes treatment very difficult, especially if patients require treatment in the middle of a health plan year.

FAQS

How are patients impacted by 340B?

The lack of oversight of and transparency into the 340B program means there is no guarantee that discounted drug prices will be passed onto patients or that savings will be reinvested into the community.

How are independent physicians and pharmacists impacted by 340B?

The 340B program incentives lead to consolidation because covered entities can use the discounts to outcompete independent practices, causing them to be bought out or shut down. Additionally, the rise of contract pharmacies owned by PBMs threatens the survival of independent and community pharmacies.

How can 340B return to its intended purpose?

340B is a federal program that needs a federal solution. Lawmakers should enhance transparency and reporting requirements to ensure 340B discounts are being used as intended, not for profit, and protect 340B from abuse by PBM middlemen. Additionally, Congress should balance protecting physician practices and access to community-based services while supporting the sustainability of covered entities’ operations in low-income areas.

How do pharmacy benefit managers (PBMs) affect patients?

PBMs control the lists of medications covered by insurance companies and further complicate the drug pricing process. Furthermore, by operating in a “black box” whereby they can negotiate lower drug costs but keep the surplus as profit, they harm patients’ abilities to afford and access the medication they need.

Why are out-of-pocket costs increasing so quickly?

Out-of-pocket costs for critical medications are rising across Florida, especially for insured patients living with chronic diseases. Health insurers and pharmacy benefit managers increasingly require high coinsurance payments – sometimes thousands of dollars out-of-pocket for a single prescription.

While any Floridian can be burdened with high out-of-pocket costs, those most likely affected are living with chronic, debilitating or life-threatening conditions such as cancer, HIV/AIDS, rheumatoid arthritis, hemophilia, multiple sclerosis or epilepsy.

Why are specialty tiers and adverse tiering discriminatory?

Specialty tiers and adverse tiering are discriminatory because they apply most often to Floridians with chronic, debilitating and life-threatening illnesses. These practices run counter to the very concept of insurance. Families pay their insurance premiums expecting that if family members get sick, they can afford care. Instead, specialty tiers and adverse tiering shift necessary treatment costs to the people who need it most.

Why doesn’t the Affordable Care Act fix these problems?

The ACA established an annual limit of $6,850 for individuals and $13,700 for families on out-of-pocket spending. However, it did not establish a cap for spending on individual drugs and medical services. Therefore, patients might have to pay a substantial deductible, copay or coinsurance bill at the point of sale or service. Further, not all medical expenses apply toward the ACA limit. Out-of-network providers, services and medications that are not covered by a patient’s health plan, as well as benefit services deemed “non-essential” might not be included in the annual out-of-pocket maximum.