New Study Raises Concerns About Hospital Acquisitions of Physician-Based Oncology Practices within the 340B Drug Discount Program

Washington, D.C. (May 29, 2014) – Today, the Biotechnology Industry Organization (BIO) expresses support for the release of a Berkeley Research Group (BRG) analysis entitled Trends in 340B Covered Entity Acquisitions of Physician-based Oncology Practices.  The 340B program has grown tremendously in the last few years, and one driver of that growth is hospitals acquiring physician practices.  This study quantifies this emerging trend by analyzing 340B chargebacks for certain oncology products to understand this dynamic and the impact of such acquisitions on the volume of 340B discounts. The findings raise important questions about how participating hospitals may use the 340B program for financial gain, rather than its original intent of helping uninsured indigent patients gain better access to prescription medicines at safety net facilities.

“This report shows that acquisitions of physician-based oncology practices leads directly to increased purchases of oncology drugs through the 340B program.  It is unclear whether these increased purchases are improving patients’ access to care or simply shifting purchases out of the physician setting and into the hospital setting” said Aaron Vandervelde, the study’s lead author.

“This is further proof that the 340B program has departed significantly from its original intent, leading to evidence of misuse of the program and unintended consequences for patients,” said Jim Greenwood, President and CEO of BIO. “The program should benefit needy patients, but many hospitals are using the program for their own financial benefit.”

The study’s key findings include:

•  Acquisitions of physician-based oncology practices by 340B covered entities increased significantly over the 2009-2012 time period included in the study; and more recent data indicates this trend continued in 2013.
• The average volume of oncology-related 340B chargebacks at covered entities that acquired a physician-based oncology practice (“Acquiring Covered Entities”) was comparable to those entities that did not acquire a physician-based oncology practice (“Non-Acquiring Covered Entities”) in 2009, but grew to be three times greater than Non-Acquiring Covered Entities by 2012.  The vast majority of this growth is attributable to 340B purchases by the acquired physician-based oncology practices (“Acquired Sites”).
• The amount of average yearly 340B chargebacks included in this study did not appear to correlate with the volume of charity care provided by the Acquiring Covered Entity. Indeed, 45% of the covered entities included in the study generated more oncology-related chargebacks than they reported in total charity care costs for the same fiscal year, thereby recouping more than their self-reported total charity care costs with just the chargebacks obtained on this subset of oncology products.  This disparity would be even greater had the study examined chargebacks obtained across the hospitals’ entire 340B purchases.
• The majority of the Acquired Sites reviewed in the study (83 of 144) were located in communities with higher median-incomes than that of the Acquiring Covered Entity, while only 14 Acquired Sites were located in communities with a lower medium income than that of the Acquiring Covered Entity.

Distorting the program in this way to create a revenue line—a financial instrument—may comply with the letter of the law, but not the intent of the law.  As the Health Resources and Services Administration (HRSA) may not have the tools necessary to bring the program back in alignment with its original intent, Congress must take a closer look at the program to ensure it is used to meet patient needs.

“We will continue to work with Congress and the federal government to ensure the 340B program reflects its original purpose—to facilitate access to needed medicines for indigent patients at true safety net hospitals and grantees—and avoid unintended consequences for patients and providers,” said Greenwood.

The full study can be accessed here.