Hospitals See Growing Financial Impact of Restrictions on 340B Rebates

A growing number of drug makers imposing limits on 340B rebates has led social care hospitals to expect more financial impact, according to survey results released Thursday.

According to a survey of 550 hospitals conducted for the 340B Health Hospital Group in March, hospitals, rural referral centers and single community hospitals expect an average of $2.2 million a year in contract pharmacy savings due to 340B rebate caps. For 10% of these hospitals, losses are expected to be at least $21 million. Critical access hospitals expect to lose an average of $448,000 per year, up from $220,000 in December.

In a related survey conducted in December, hospitals reported an expected average annual loss of $1 million.

These hospitals have changed their minds in large part because six other drug companies have announced limits on 340B discounts at contract pharmacies. The number of drug makers limiting these discounts has grown from eight to 14 during this time.

What’s more, the new survey results likely underestimate the financial impact: Since hospitals were surveyed, Johnson & Johnson and Gilead have joined the list of pharmaceutical companies that have tightened the 340B rules.

Pharmaceutical companies with Medicaid or Medicare must provide drug rebates to insurance network providers, including hospitals, under the federal 340B program. But drug makers have begun putting limits on the discounts hospitals can get on outpatient drugs in 2020. Some prohibit hospitals from using discounts at multiple contract pharmacies. Others require hospitals to provide a large amount of data in order to receive discounts.

Pharmaceutical companies say the policy prevents duplication of discounts and diversion of drugs. But the federal government sent out letters to manufacturers informing them that their restrictions could result in fines. Seven manufacturers have sued the Department of Health and Human Services over the letters, and federal judges disagree on whether the agency had the authority to send them. Appeals in the cases are still pending.

More than 75% of respondents to the March survey said they would have to cut or adjust programs if discount restrictions remain in place. Hospitals report that this could impact their patient care services, their ability to provide discounted or free drugs, programs to address social determinants of health, and more. More than 20% of hospitals said the restrictions put them at risk of closure.

340B Health said drug companies are increasingly imposing restrictions on specialty drugs, exacerbating the losses hospitals are suffering.