Total 340B purchases to reach $16B by 2019: 4 drivers of the program's growth

Fueled in large part by participation of disproportionate share hospitals, the 340B discount drug program will rapidly expand in coming years, according to a recent whitepaper by the Berkeley Research Group.

The 340B program has experienced significant growth over the last several years, with total purchases increasing from $1.1 billion in 1997 to more than $7 billion in 2013. Continuing with the growth trend, total purchases are expected to increase to more than $16 billion by 2019.

Below are four of the main drivers that have contributed to 340B program growth, and these drivers are expected to continue to propel the program over the next five years, according to the whitepaper.

1. Increase in the number of 340B enrolled disproportionate share hospitals. There were 185 disproportionate share hospitals enrolled in the 340B program in 2003, and that number grew to approximately 1,000 by 2013. The growth is largely due to the alteration of the disproportionate share hospital calculation for certain hospitals under the Medicare Modernization Act of 2004. Disproportionate share hospitals purchase more than 80 percent of 340B drugs and accounted for roughly half of total 340B drug spending in last year. 

2. Acquisition of satellite clinics by disproportionate share hospitals. Between 2009 and 2012, at least 140 transactions took place involving disproportionate share hospitals acquiring oncology practices, which led to an increase of nearly 120 percent in 340B oncology drug utilization. Researchers project the trend, which will also involve acquisition targets other than oncology practices, will continue, leading to an additional $1.5 billion in 340B purchases by 2019.

3. Expansion of contract pharmacy arrangements. In 2010, the Health Resources and Services Administration issued guidance allowing 340B entities to contract with an unlimited number of pharmacies to provide 340B purchased drugs to eligible patients. The arrangement expansion has led to roughly two-thirds of all 340B disproportionate share hospitals having at least five contract pharmacies.

4. Health reform. Pediatric hospitals, critical access hospitals, sole community hospitals, rural referral centers and freestanding cancer centers became eligible for 340B program participation under the Patient Protection and Affordable Care Act, and more than 1,100 of those entities have since enrolled in the 340B program. Additionally, due to Medicaid expansion increasing the disproportionate share hospital percentage to more than the 340B eligibility threshold for some hospitals, additional hospitals could become eligible for the program. Increased participation in the 340B program due to this expansion could result in incremental 340B purchases of more than $1.4 billion by 2019.

More articles on the 340B program:

HHS withdraws 340B 'mega rule' 
PhRMA challenges 340B drug discounts again 
Are hospitals abusing the 340B drug discount program? New study reignites controversy 

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