The 340B program was created in 1992 to give certain ‘safety net providers’ discounts on outpatient drugs that are supposed to be comparable to pricing made available to state Medicaid agencies.
These hospitals and clinics, or ‘covered entities,’ spend about $6 billion annually on drugs, with industry estimates projecting the spending could reach $12 billion by 2016.
The projected spending on drugs reflects the growth in the number of covered entities which grew from 8,605 to 16,572 over the past decade. The number of Contract Pharmacies has grown from 2,400 in 2009 to over 12,000 in 2013.
Analysis by Avalere Health of newly available data indicates that many of the hospitals enrolled in the 340B program are not fulfilling Congress’ expectations to support access to prescription drugs for vulnerable, uninsured and indigent patient populations.
While there are some 340B hospitals that provide considerable charity care, charity care represents 1% or less of patient costs at approximately one-quarter of 340B hospitals. For more than two-thirds of 340B hospitals, charity care as a percent of patient costs is less than the national average.
Hospitals can enter into an agreement with one or multiple outpatient or retail pharmacies to provide 340B drugs to qualified patients on behalf of the covered entity.
The outpatient pharmacy dispenses 340B drugs to eligible patients and provides all counseling and adjudication services, as well as inventory management. Contract Pharmacy receives a fee for each prescription dispensed. All revenue and co-pays collected for each prescription are passed onto the covered entity.