Non-Profit Charity Hospitals Make "a Handsome Profit" on Cancer Drugs, New Report Says

340B hospitals charge privately insured patients 3.8 times their costs to acquire drugs, shows examination of price transparency data

Community Oncology Alliance report calls for 340B program reforms that ensure discounts benefit patients, not hospitals

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Community Oncology Alliance

Sep 14, 2021, 13:14 ET

WASHINGTON, Sept. 14, 2021 /PRNewswire/ -- The nation's so-called non-profit 340B charity hospitals make "a handsome profit" marking up oncology drug prices to their patients and insurers, according to a new report commissioned by the Community Oncology Alliance (COA) and being released today.

The data shows that 340B hospitals price drugs at 3.8 times their 340B acquisition costs.

The report finds that hospitals participating in the 340B Drug Pricing Program charge an average of 3.8 times their acquisition costs for pricey cancer drugs and do not provide lower prices for uninsured or cash paying customers. One drug used to treat anemia caused by chemotherapy, Epogen, was priced at 11 times its cost to the hospital.

Click here to access the full report "Examining Hospital Price Transparency, Drug Profits, & the 340B Program" on the COA website.

Prepared for COA by consultancy firm Moto Bioadvisors, led by industry analyst Aharon "Ronny" Gal, PhD, the report is the first of its kind to use hospitals' own price transparency data to explore differences in hospital contractual prices for drugs, as well as the impact of the 340B program.

Founded in 1992, 340B is a federal program that requires drug manufacturers to provide outpatient drugs at significantly reduced prices to eligible health care organizations that are supposed to treat high numbers of uninsured and low-income patients. Hospitals claim the savings are used to reduce the price of drugs for patients and expand health services, but the report makes clear the discounts are being captured by the hospitals as profits rather than being passed on.

The report took an unprecedented look at 52,180 individual hospital-reported prices for 59 oncology drugs that reflected the highest expenditures for Medicare in 2019. The results reflect a unique combination of hospital-payer-drug charges.

The Moto researchers found that 340B hospitals overwhelmingly fail to fully comply with federal hospital transparency regulations that went into effect this year. Working from the entire list of 1,087 acute care, disproportionate share 340B hospitals, the researchers found that only 123 facilities – 11 percent of the total –published all the required data on drug prices, despite a U.S. Department of Health and Human Services regulation effective on January 1, 2021, requiring publishing price data to avoid a relatively minor $300 per day fine. The others either failed to comply with the January 1, 2021 mandate or published data that was difficult to analyze or was incomplete.

The report highlights the infused multiple myeloma drug Darzalex as a stunning example of how 340B hospitals profit enormously from different patients and payers:

Considering various discounts, a community oncology practice, for example, would pay $116,876 for a year's treatment of Darzalex and be reimbursed by Medicare at $123,889, making $7,013 to cover costs for administering the drug.
A 340B hospital – a so-called non-profit charity hospital – would buy the same amount of the same drug for $76,320 and be reimbursed by Medicare at $90,579, making $14,259 for administering the drug.
That same 340B hospital treating a patient with commercial insurance would also buy the same amount of Darzalex for $76,320. But the hospital will charge the insurer 3.8 times that or $290,016, making a profit of $213,696 for a single patient, fifteen times that of a Medicare patient.

The study's lead author, Aharon (Ronny) Gal, PhD, concluded that "non-profit 340B hospitals charge both commercial payers and uninsured patients extraordinarily high prices and use an aggressive form of price discrimination between payers." The report also identifies "several points where 340B hospital strategies conflict with public policy goals, like encouraging price competition and adoption of biosimilars."

"It's no wonder the analysts found that nearly 90 percent of the 340B hospitals they attempted to look at either buried their data, paid a modest fine to the government, or published gibberish that even a team of PhDs could not decipher," said Ted Okon, executive director of COA.

"This report reveals how 340B hospitals are dramatically fueling drug costs for Americans and employers who fund health benefits, which is the largely unreported story of why drug costs are so high in this country," Okon continued. "The 340B program is critically important to helping Americans in need, especially those with cancer, which is why Congress needs to fix this broken government program in a way that ensures the discounts go to patients, not fat hospital systems excessively profiting off of expensive drugs."

The report is released as policymakers in Washington need to continue to demand increased transparency from hospitals and the ever-growing 340B program, including how much patients and insurers are charged for drugs. Congress needs to make program changes to ensure that 340B truly benefits uninsured or underinsured patients.

Further exemplifying the perverse economics of 340B hospitals and drug prices, the report also found that hospitals participating in the program favored innovator biologic cancer drugs instead of lower-cost biosimilar versions because they pocket higher profits. In fact, according to researchers, many 340B hospitals don't even seem to have adopted biosimilars, with "between 25 percent and 56 percent of hospitals list prices for only the innovator product and essentially none carry all the biosimilars," the report said.

To access the full report "Examining Hospital Price Transparency, Drug Profits, & the 340B Program" on the COA website visit https://communityoncology.org/hospital-340b-drug-profits-report.

About the Community Oncology Alliance
The Community Oncology Alliance (COA) is a non-profit organization dedicated to advocating for community oncology practices and, most importantly, the patients they serve. COA is the only organization dedicated solely to community oncology where the majority of Americans with cancer are treated. The mission of COA is to ensure that patients with cancer receive quality, affordable, and accessible cancer care in their own communities. More than 1.5 million people in the United States are diagnosed with cancer each year and deaths from the disease have been steadily declining due to earlier detection, diagnosis, and treatment. Learn more about COA at communityoncology.org.

SOURCE Community Oncology Alliance