Part B Payments for 340B Purchased Drugs

WHY WE DID THIS STUDY

Medicare Part B pays a set amount to health care providers who furnish drugs to its beneficiaries. Certain eligible health care providers-generally, those that serve a disproportionate share of needy patients-are allowed to purchase drugs using the 340B Drug Discount Program, thereby receiving sizable statutory discounts. Past Office of Inspector General (OIG) work found that Medicare payments to providers for 340B purchased drugs substantially exceeded the providers' costs. Under the design of the 340B Program and Part B payment rules, the difference between what Medicare pays and what it costs to acquire the drugs is fully retained by the participating covered entities, allowing them to stretch scarce Federal dollars in service to their communities. However, some policymakers have questioned whether a portion of the savings mandated through the 340B Program should be passed on to Medicare and its beneficiaries.

HOW WE DID THIS STUDY

We determined how much Part B spent on 340B-purchased drugs in 2013 by identifying paid Medicare claims from covered entities. We compared 2013 Part B payment amounts to 340B ceiling prices at the individual drug level and the aggregate level. We also analyzed the financial impact on covered entities, the Medicare program, and Medicare beneficiaries of three different shared-savings arrangements that would enable Medicare and its beneficiaries to share in the cost savings resulting from 340B discounts.

WHAT WE FOUND

Medicare Part B and its beneficiaries paid $3.5 billion for 340B-purchased drugs in 2013. In the aggregate, Part B payment amounts were 58 percent more than the statutorily based 340B ceiling prices that year, which allowed covered entities to retain approximately $1.3 billion. The 340B statute does not restrict how covered entities may use these funds. The three shared-savings arrangements described in this report would have resulted in Medicare Part B savings of $162 million to $1.1 billion in 2013 while still providing covered entities with incentives to purchase those drugs through the 340B Program.

WHAT WE CONCLUDE

OIG has produced an extensive body of work examining the 340B Program from various angles. As stakeholders debate the nature of 340B discounts and whether statutory changes should be made to enable Medicare and/or Medicaid to share in these savings, this report presents an independent analysis to inform the ongoing discussion and to support congressional and Administration decisionmakers' efforts in striking a balance among the needs of these vital programs.