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November 2015

Value of the 340B Drug Discount Program

Author Affiliations
  • 1Leukemia Department, MD Anderson Cancer Center, Houston, Texas
  • 2Division of Hematology and Medical Oncology, Josephine Ford Cancer Institute, Detroit, Michigan
JAMA Oncol. 2015;1(8):1029-1030. doi:10.1001/jamaoncol.2015.2168

The 340B program, a drug discount program created by Congress through the Veterans Health Care Act of 1992,1 offers safety-net hospitals and other health care organizations eligible for 340B designation (“covered entities”) with large shares of low-income, vulnerable patients access to discounted drug pricing. This allows them to stretch resources to help more patients and provide more comprehensive services.2

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1 Comment for this article
340B Pricing Has Not Realized Its Promise
Ian Schnadig, MD | Compass Oncology, US Oncology Research
Dear Sir/Madam:

Dr. Kantarjian's article, \"The Value of 340B Pricing\" woefully misses the point of the costs of delivery of care in a hospital-based environment.

One-third of US hospitals purchase chemotherapy drugs through the 340B program, which discounts drugs up to 50%. Community cancer clinics are not eligible for these same discounts. Notwithstanding these steep discounts, the costs of care in the hospital setting remain steeply higher. Researchers at the Berkeley Research Group examined the expanded delivery of oncology services by 340B hospitals through the acquisition of community cancer practices, which they concluded leads to higher costs to the Medicare

The cost of treating cancer patients is significantly lower to both patients and the Medicare program when care is delivered in community cancer clinics as opposed to the outpatient hospital setting. According to recent data, total Medicare spending on patients receiving chemotherapy in the community clinic is 14.2% lower than the hospital outpatient department, which equals $623 million per year.(1)

The cost of providing the same cancer care in a hospital outpatient department (HOPD) is significantly higher than the same care delivered at a community cancer clinic: 126% higher costs for administering common cancer drugs and 100% higher costs for drug infusion services overall. Patient co-payments are approximately 10% lower in the clinic, equaling more than $650 in savings for each Medicare beneficiary fighting cancer per year.

Additionally, the average out-of-pocket patient cost for commonly used cancer drugs is $134 less per dose if received in an oncologist’s office. (1)

Data show between 2009 and 2012, Medicare beneficiaries paid $4.05 million more
in out-of-pocket costs because of the higher patient co-payment due to the HOPD for the exact same chemotherapy services performed at community cancer practices.(2)

The 340B program, despite its promise, has led to higher chemotherapy reimbursement for hospitals. A new IMS Institute report finds that more Americans are receiving cancer care
from oncologists, whose practices have been bought by hospitals, thereby
increasing costs. Compounding this trend, reimbursement levels for drug administration costs in HOPD are, on average, 189 percent higher than physician office reimbursement costs.(3)

This was an unusual article for JAMA to publish and creates an appearance of bias in favor of the hospital systems whose lobbying organization provided editorial support for the work. We hope that appropriate citations will be provided for this article in a forthcoming issue.

(1) Cost Differences in Cancer Across Settings, The Moran Company, August 2013
(2) Berkeley Research Group, \"Impact on Medicare Payments of Shift in Site of Care for Chemotherapy Administration\", June 2014
(3) IMS Institute for Healthcare Informatics, \"Innovation in Cancer Cancer and Implications for Health Systems: Global Oncology Trend Report,\" May 2014

Sincerely yours,

Ian Schnadig, MD
Chair, Pharmacy & Therapeutics
GU Chair, Pathways Task Force