The Government Accountability Office (GAO) has issued a report examining financial and other characteristics of hospitals that participate in the 340B Drug Pricing Program, focusing on disproportionate share hospitals (DSH) that account for the majority of 340B Program discount drug purchases. Based on a review of Health Resources and Services Administration (HRSA) data for 2008 and 2012, the GAO found that per-beneficiary Medicare Part B drug spending, including oncology drug spending, was substantially higher at 340B DSH hospitals than at non-340B hospitals ($144 vs. $60, respectively in 2012). The GAO did not find differences in hospital characteristics or patients’ health status that accounted for this difference.

The GAO suggests that since Medicare Part B payments to hospitals for drugs do not vary based on hospitals’ costs for acquiring the drugs, “there is a financial incentive at hospitals participating in the 340B program to prescribe more drugs or more expensive drugs to Medicare beneficiaries.” According to GAO, any excess spending has negative implications for the Medicare program and Medicare beneficiaries who would be financially liable for larger copayments as a result of receiving more drugs or more expensive drugs. In addition, “this incentive to prescribe these drugs raises potential concerns about the appropriateness of the health care provided to Medicare Part B beneficiaries.”

The GAO concludes that “[a]bsent a change in financial incentives, potentially inappropriate spending on drugs may continue.” While the GAO observes that limiting hospitals’ Medicare Part B reimbursement for 340B discounted drugs or eliminating the 340B discount for drugs provided by hospitals to Medicare Part B beneficiaries could address such potential incentives, the Centers for Medicare & Medicaid Services (CMS) and HRSA lack the statutory authority to take such action. The GAO therefore recommends that Congress “consider eliminating the incentive to prescribe more drugs or more expensive drugs than necessary to treat Medicare Part B beneficiaries at 340B hospitals.”

For more information, see the full report, “Medicare Part B Drugs: Action Needed to Reduce Financial Incentives to Prescribe 340B Drugs at Participating Hospitals.”