"340B" - Access Reduced Drug Prices: Key Facts, Polling, Best Practices

Policy Overview:  Create a task force to study and report how best to maximize participation in 340B pricing, a provision of the Federal Public Health Act that authorizes discounted drug prices (below Medicaid levels) for certain populations and safety net health care providers, like rural hospitals, federally qualified health centers and prison populations.  States have numerous options that should be studied and explored to ensure that populations and programs eligible for 340B pricing are receiving the reduced prices, resulting in savings for state budgets and consumers.

Link: Model Legislation to Lower Prescription Drug Costs and Protect Against Unfair Prescription Drug Practices

Key Facts on 340B: 340B pricing, a provision of the Federal Public Health Act, authorizes discounted drug prices (below Medicaid prices) for certain safety net health care providers, like federally qualified health centers, those serving prison populations, hospitals that serve a large Medicaid and uninsured population, and clinics for homeless people.  The Senate health reform bill would expand discounts to include inpatient drugs and extend eligible participation to critical access and sole community hospitals, cancer hospitals, and other providers.

• 340B prices are 19% below the average Medicaid best price net or rebates, 39% below the average reimbursement from insurers, and 51% less than average wholesale price. 
• Texas saves $10 million per year using 340B pricing for its prison population
• Hospitals that are eligible for and are utilizing 340B pricing save state Medicaid programs an average of $300,000 per year
• 340B pricing can make specialty drugs more accessible for patients, and more affordable for states and providers.  Examples include medications for Multiple Sclerosis, Cancer, Antivirals, and Rheumatoid Arthritis.

Key Facts on Drug Prices: The pharmaceutical industry is raising its prices at the fastest rate since 1992.  Critics identify this as an attempt to wedge in higher prices before Congress passes health reform that may clamp down on exorbitant drug prices and begins expanding coverage to millions of Americans.  Leading up to the creation of the Medicare Part D drug benefit, which notably lacked authority for Medicare to flex taxpayers’ purchasing power to negotiate lower prices, drug manufacturers raised their prices at the widest margin in 6 years.  The industry has so far protected its profits by spending more than almost all other lobbies in Washington, DC.

• In 2007, the U.S. spent $287 billion on pharmaceutical drugs, representing 14% of all health care expenditures and a significant driver of health care costs. 
• Drug manufacturers spend more money marketing drugs ($30B each year) than developing new ones.
• 1 in 7 Americans reportedly went without prescribed drugs in 2007, up from 1 in 10 in 2003.

Polling Data:

•  70% of Americans say the industry puts profits before people, according to a 2005 Kaiser Family Foundation poll.
• 74% of Americans believe the drug industry makes too much profit, according to a November 2009 Associated Press poll.
• 9 in 10 Americans support the government using its buying power to negotiate lower prices from drug companies, which many states are already doing, according to a recent Kaiser Family Foundation/Harvard poll.

For more, see Pew and Community Catalyst's public opinion survey on American's concerns about drug industry gifts and other ties to physicians and a recent Kaiser Family Foundation/Harvard/NPR survey on the public's opinion of the role of health care interest groups in health reform.

Best Practices for Maximizing 340B Pricing: In addition to our model legislation creating a task force to identify how best to expand 340B in your state, other best practices include:

• TX: SB 347, enacted in 2001, created a program to utilize 340B pricing for the prison population, resulting in annual savings of $10 million.
• VT: Public Act 71 of 2005, an appropriations bill, created more opportunities for 340B pricing by expanding the number of Federally Qualified Health Centers in the state and creating a purchasing co-op for the joint purchasing of medications through 340B.  This initiative was the result of a task force report authorized by the legislature on how best to expand 340B pricing in the state.
• MA: H 2243 would require eligible health care centers to participate in 340B pricing.

Possible Federal Action Creates Potential for States to Go Further:  Federal reform may set the stage for states to greatly expand their Rx reform initiatives, most notably those included in PSN’s 2010 Rx Agenda.  While the House reform bill authorizes Medicare to negotiate with the drug industry for reduced prices, a key and necessary reform, the Senate bill simply calls for a study of Medicare Part D drug prices.  Both bills greatly expand the 340B price discount program by, in part, including inpatient settings and expanding eligibility for the discounts to include children's hospitals, certain cancer and rural hospitals, like critical access hospitals.