Hospitals see growing financial impact from 340B discount restrictions

By Maya Goldman / May 5, 2022

The mounting number of drugmakers imposing restrictions on 340B discounts has led safety net hospitals to expect a larger financial impact, according to survey results published Thursday.

Disproportionate share hospitals, rural referral centers and sole community hospitals expect to lose a median of $2.2 million a year in contract pharmacy savings due to 340B discount limits, according to a survey of 550 hospitals conducted for the hospital group 340B Health in March. For 10% of those hospitals, losses are expected to be at least $21 million. Critical access hospitals expect to lose a median of $448,000 a year, up from $220,000 in December.

In a corresponding survey conducted in December, hospitals reported expected median annual losses of $1 million.

These hospitals have changed their outlooks largely because six more pharmaceutical companies announced restrictions on 340B discounts at contract pharmacies in the interim. The number of drugmakers limiting these discounts grew from eight to 14 during that time.

Moreover, the new survey findings likely understate the financial impact: Since the hospitals were polled, Johnson & Johnson and Gilead joined the list of drug companies tightening 340B rules.

Pharmaceutical companies participating in Medicaid or Medicare must discount medicines for safety-net providers, including hospitals, under the federal 340B program. But drugmakers began placing limits on discounts hospitals could get for outpatient drugs in 2020. Some prohibit hospitals from using discounts at multiple contract pharmacies. Others require hospitals to submit a large amount of data in order to receive the discounts.

Drug companies say these policies prevent duplicate discounts and drug diversion. But the federal government has sent letters to manufacturers informing them that their restrictions may subject them to fines. Seven manufacturers have sued the Health and Human Services Department over the letters, and federal judges are split over whether the agency had the authority to send them. Appeals on the cases are still pending.

More than 75% of respondents to the March survey said they'll need to make cuts or adjustments to programs if the discount restrictions remain in force. Hospitals report this could affect 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 limits on specialty drugs, exacerbating the losses felt by hospitals.