The 340B drug discount program was enacted more than 30 years ago to lower the cost of medications so providers could deliver more comprehensive services for vulnerable patients. As care delivery has evolved greatly over that time, the program has not appropriately changed to match it and is no longer effectively meeting its original intent. The program’s rapid growth and misaligned incentives have led to a muddied, complex system with poorly defined standards and a lack of clarity around program oversight.
Participating providers and drug manufacturers currently face challenges with non-standard processes, unnecessary operational costs, and compliance issues that negatively impact their ability to deliver care to patients. The time for change is now. Stakeholders must work together to address these pain points to ensure this essential drug discount program evolves and continues supporting the patients it was intended to serve. This starts with unifying disparate data systems and creating a common ledger of truth to allow clarity for drug discount data.
The ever-evolving landscape of 340B and program growth
The 340B program was established in a far different world than what we know today. In the 1990s, most providers operated on paper charts, as electronic health record systems only became ubiquitous after the HITECH Act of 2009. Lawmakers at the time could not have foreseen the vast digital ecosystem of data that exists today or the need to integrate that data for programs such as 340B.
Additionally, a wholesaler was initially chosen by the Health Resources and Services Administration (HRSA) to develop the prime vendor program. This resulted in a discount model that mirrored pharmaceutical distribution processes, a program based on “saleable packages” instead of a unit-based discount program common to other government models like the Medicaid Drug Rebate Program. Under the package-based model, it is often extremely challenging to trace a unit of a product administered to a patient back to the actual 340B package that was purchased. Further compounding this overly complex system is the use of an unapproved “package replenishment model,” where non-340B inventory is initially administered to a patient, then a ledger is used to accumulate and reconcile the error and justify a corrective purchase at the 340B price.
According to the U.S. Government Accountability Office, more than 2,600 hospitals were participating in the 340B program as of January 2023. In 2023, HRSA, the agency currently responsible for overseeing the 340B program, reported that 340B sales were at least $66 billion, which was a 23 percent increase from the prior year. For the same timeframe, the Centers for Medicare and Medicaid Services (CMS) reported that total U.S. drug spending only increased 11.4 percent. This indicates a disproportionate shift to increased 340B utilization in the marketplace, but identifying the actual drivers for this growth is problematic due to limited data reporting requirements.
The operationally vague statutory language can be helpful when trying to apply a broad statute to disparate stakeholders in an ever-changing landscape. It allows programmatic flexibility to respond to stakeholder-specific needs and changing times; however, HRSA has not appropriately recognized the changing circumstances and seems to be out of touch with the current practices, capabilities, and cross-programmatic challenges its stakeholders are facing.
In the current environment, transparent information and interconnected data drive needed change and catalyze innovation. It is necessary for stakeholders to acknowledge, accept, and leverage reform to foster the appropriate evolution of the 340B program and effective cross-collaboration with other agencies and their drug discount programs. Modernizing this 30-year-old program would greatly increase efficiencies, minimize waste, and ensure all stakeholders can get back to their collective missions of caring for patients and striving to ensure they receive the best possible care.
Advanced tools, tech, and data analytics lending clarity to drug discounts
With the advent of advanced technology and data analytics, the pharmaceutical industry has evolved to streamline processes and improve outcomes. In the case of the 340B drug discount program, advanced technology and analytics are primed to help stakeholders navigate the complexity of the drug discount ecosystem, foster collaboration, build trust, and improve transparency and accountability.
The first step toward a harmonious system is centralizing data on advanced platforms and securely using business analytics tools to produce actionable insights. These advanced technologies and platforms can hold extensive amounts of drug discount information and handle the complexities of impending changes, enabling optimization and compliance within each drug discount program, and, more importantly, at the points where they overlap. This includes establishing a standardized, secure repository of drug utilization that is appropriately visible to providers and manufacturers.
Investing in data analytics to highlight aberrations and prompt further examination goes hand in hand with data collection. These tools help connect disparate data sets, validate quality inputs, and create a single source of truth for each dispense to ensure insights and changes are scalable as programs evolve. Historically, this level of visibility would have been impossible, but applying sophisticated data models and machine learning can enhance compliance and clarity in the 340B program. This also reduces costs and improves the 340B experience across the board for both covered entities and drug manufacturers, fostering direct relationships between them and ultimately ensuring efficient and clear communication.
Centralizing tracking of data submissions and discount information while measuring program outcomes ensures equal access to program data and information. This approach levels the playing field across the pharmaceutical industry and benefits both big and small companies and providers participating in drug discount programs by increasing trust and encouraging collaboration.
To improve clarity and collaboration across drug discount programs, stakeholders must operate from one source of truth. Advanced technology and data can help illuminate this trust and effectively manage drug discount programs in a standardized and clear way. By facilitating real-time discounts based on clear data, we can work together to reduce costs and ensure patients have access to the life-impacting therapies they need.
Gavin Magaha is a health care executive.
