AHA: Drugmaker 340B restrictions are harming safety net hospitals financially

A new hospital industry report charges that safety net and charity care hospitals are losing millions due to drug companies cutting off sales of pharmaceuticals discounted under the 340B program to contract pharmacies.

The report, released Monday and conducted by the American Hospital Association (AHA), focuses on the impact of restrictions conducted by nearly 20 drugmakers. The federal government and some of the companies have been battling in court over the moves. 

The report details how the moves are “directly reducing access to care and services for patients and communities, especially those in rural areas,” said Stacey Hughes, AHA’s executive vice president. “Drug companies are limiting discounts that help hospitals provide free care for uninsured patients, services in mental health clinics and many community health programs.”

AHA’s findings are based on a survey of more than 300 hospitals and health systems that are a part of the 340B program. The program mandates drugmakers offer discounts to safety net providers in exchange for participation in Medicare and Medicaid. 

It showed that the average 340B critical access hospitals with 25 beds or less have reported annual losses of $507,000. Average 340B disproportionate share hospitals, which serve a large number of Medicaid patients and the uninsured, also suffered annualized losses of nearly $3 million, the report said.

Some respondents say contract pharmacies are a common source of savings from 340B.

“On average, [critical access hospitals] reported 44% of their total 340B savings coming from community and specialty pharmacies, with several [critical access hospitals] reporting that their entire 340B savings come from these arrangements,” the report said.

It found that critical access hospitals in 340B were hit harder by the restrictions than disproportionate share hospital facilities. 

“Overall, 10% of responding hospitals reported $10 million more in financial impact,” AHA added.

Since July 2020, a steady number of drug companies have cut off sales of 340B drugs to contract pharmacies, which are third parties that dispense the drugs on behalf of the covered entity. Several drug companies have said the moves are intended to ensure they aren’t delivering duplicative discounts under 340B and Medicaid. 

Drug companies have charged that the restrictions are also necessary to ensure discounts offered by 340B reach the patient.

The Health Resources and Services Administration, which oversees 340B, has warned several drug companies over the moves, prompting lawsuits from some of the companies.

The legal fight over the cuts continues to make its way through the courts

New York’s attorney general has also sued CVS Health, alleging the pharmacy giant prevented some safety net facilities from receiving 340B discounts.

AHA cautioned that the report may understate the full impact, since the survey was fielded in April 2022 and several more companies have imposed restrictions since then.