Pharmacy Times interviewed Melody Chang, RPh, MBA, BCOP, vice president of pharmacy operations at American Oncology Network, LLC, on the 340B Drug Pricing Program and its impact on community oncology. Chang describes how the 340B program’s growth has influenced on the landscape of cancer care, and how it raised concerns about treatment access and affordability.
Key Takeaways
- 340 Drug Pricing Program’s Evolutions: The 340B Drug Program, which was established in 1992, aimed to provide discounted outpatient drugs to eligible health care organizations to serve low-income and underinsured or uninsured patients. Initial growth was slow, with around 500 participating hospitals being involved after more than a decade, but the due to changes resulting in hospitals treating Medicaid patients making them eligible for the program, growth increased to 2500 hospitals.
- Changes Impacting Community Oncology Practices: In 2018, The Centers for Medicare and Medicaid Services implemented changes that reduced Medicare payment for 340B drugs. This was seen as beneficial for community oncology, as it decreased the incentive for 340B hospitals to acquire community practices and lowered out-of-pocket costs for patients; however, the proposed 2024 Hospital Outpatient Payment System may reverse these changes by removing the cap and continuing to reimburse 340B drugs at a higher rate, potentially disadvantaging independent community oncology practices.
- 340B Program’s Impact on Drug Shortages and Cancer Care: The 340B program has faced skepticism for potentially contributing to drug shortages. Chang describes how it the program was believed to motivate hospitals to hoard drugs and dissuade generic drug companies from necessary investments. Chang also notes that without access to discounted drug prices, community oncology practices struggled to compete with hospitals which led to closures or buyouts by hospitals, shifting the landscape of cancer care delivery.
Pharmacy Times: In the American Oncology Network’s perspective, how has the 340B Drug Pricing Program fared in terms of reaching its stated goal of enabling covered entities to stretch scared federal resources as far as possible, reaching more eligible patients and providing more comprehensive services?
Melody Chang: The 340B [Drug Pricing] Program was created in 1992, and it is a federal government program that requires the drug manufacturers who participate in Medicaid to provide outpatient drugs at a discounted price to eligible health care organizations in the covered entity. And the intent is to enable the covered entities [to] reach more low-income, under, or uninsured patients and provide a more comprehensive service. But there are no legal obligations for the 340B hospitals to provide charity care, and it [is] not required that the 340B hospital must treat the low-income, under, or uninsured patients. And there is no clear definition of eligible patients who qualify for the program, and most importantly, there is no transparency about how the money actually flows. [If it] is the discount passed down to the patient, or is it benefiting [the] hospital financially, we don't know. But at the beginning, the program actually grew slowly—but fulfilled its mission—and there were only about 500 hospitals participating after more than a decade.
In 2004, after the program established that there's only 500 hospitals, due to the changes in the Affordable Care Act in 2010, many people enrolled in the Medicaid program and more hospitals were treating Medicaid patients and making them eligible for the 340B program. In order to be eligible for the program, the hospital had to treat a certain percentage of [the] underserved community, and the Medicaid patients they were treating is a proxy for whether they are serving underserved populations or not. So, by 2019, the program had exploded in size and in scope [and] there were 2500 hospitals at that time, with drugs purchased reaching 30 million [people]. So, the 340B program has evolved over the past 30 years, and now [240B Drug Pricing Program] is that second largest federal prescription drug program, behind only Medicare Part D program…1 estimate from the Berkeley Research Group projects [is] that by 2026, 340B will be the largest federal drug program. So, it would be good if all this money was actually used to help low-income or underinsured patients, right? According to [a] Government Accountability Office report, about half of the covered entities provide no discount to low-income or uninsured patients on 340B drugs. And a resource from the Alliance for Integrity and Reform [on] 340B found 64% of the 340B hospitals have charity care rates below the 2.2% national average for all hospitals. So, for that, I don't think the 340B program reaches its goal, unfortunately.
Pharmacy Times: Have there been any recent updates in the 340B Drug Pricing Program that have impacted the American Oncology Network?
Chang: Going back to 2018, [The Centers for Medicare and Medicaid Services] (CMS) implemented changes to the [Hospital Outpatient Prospective Payment System]…and by reducing Medicare payment for the 340B drugs from [average sales price] (ASP) plus 6% to ASP minus 22.5%, and we were delighted to see that happen. It is beneficial for community oncology because it decreases the financial incentive for the 340B hospital to acquire community practices. Additionally, it is a positive development for patients as well since it will lower their out-of-pocket cost, because the patient co-pays are based on the reimbursement claim. But within the proposed 2024 Hospital Outpatient [Prospective] Payment [System], we see [that] CMS is proposing to remove the cap and to continue to reimburse 340B drugs at the ASP plus 6%. I think this will fill the roles of the large 340B hospitals, again, at the expense of independent community oncology practice…as well as of course, some small rural hospitals that serve many vulnerable patients.
Pharmacy Times: Was the 340B program at all helpful during drug shortages facing American Oncology Network practices?
Chang: Whether [the] 340B [program] causes drug shortages was a hot topic, even a decade ago. For example, in September 2012, Bill Cassidy, then a member of the ENC Committee, wrote a letter to a Georgia health system asking if 1 of its 340B hospitals was buying and hoarding 340B penny priced of fluorouracil at that time—a generic sterile injectable cancer drugs—[resulting] in [a] shortage in supply. I don't think [the] 340B program is helpful during the drug shortages, in fact, [the] 340B program not only incentivizes the 340B hospitals to stop hiring those medicines, but it also disincentivizes the generic drug company from making needed capital investment. So, I believe that that's why [American Society of Clinical Oncology] provided feedback. The stop drug shortages, act discussion draft, and then recommend the suspension of 340B discounts for drugs currently on the FDA drug shortage list, or where there is an identified threat of potential shortage.
Pharmacy Times: How did the oncology drug shortages affect American Oncology Network, and how were practices able to manage while facing these challenges?
Chang: I surely see that [the] 340B program has unintended consequences, and it hurts community oncology practices and changes the landscape of cancer care. Since community oncology practices don't have access to the discount drug prices, they cannot compete with the hospitals. As a result, they either close their doors because they cannot survive, or they are bought out by the hospitals.
About the Expert
Melody Chang, RPh, MBA, BCOP, is the vice president of pharmacy operations at American Oncology Network, LLC. She is the co-author of a study that evaluated the total cost of care among commercially insured patients with metastatic pancreatic cancer who received treatment in a hospital outpatient setting compared to community oncology settings. Chang has over 20 years of experience in the pharmaceutical industry.
So, we see in 2008, only 23% of the patients receive their chemotherapy in the hospital outpatient setting, but now, we see over 50%. So, it is important to note that the cost of the care for patients with cancer are significantly lower—on average, about 40% to 50% lower—at the community oncology practice compared to the hospital outpatient setting. But in terms of the drug pricing, the profit margin for the 340B oncology drugs is around 30%, and this is a huge, huge incentive. So, we see more drugs—and more expensive drugs—such as brand name drugs, being used by the 340B program, instead of using more of the generic or biosimilar alternatives. And so, the 340B program has also raised concerns about the delivery of the care with the growth of the large 340B hospitals, that at the expense of the smaller community oncology clinics and rural hospitals, can result in access problems for the cancer patients, especially those in underserved areas. This disparity in care delivery can lead to inequities in cancer treatment, options, and accessibility.
Pharmacy Times: Closing thoughts?
Chang: I know we spent quite a bit of time discussing 340B already…however, as health care providers, we understand the importance of the collaborations—whether it involved 340B or not—but I truly believe light is the best disinfectant. We need accountability and transparency for the program, and we need to ensure that the saving truly goes to the patients.
