HHS Inspector General Critical of 340B Program Spending

December 08, 2015

McDermott+Consulting

The U.S. Department of Health and Human Services Inspector General released another report critical of the 340B program and proposed changes to reduce Medicare spending on 340B drugs.

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Continuing a trend of reports critical of the 340B program, the Inspector General (IG) for the U.S. Department of Health and Human Services on November 24, 2015, released a report identifying savings that could be realized by making changes to the Medicare program’s Part B drug payment rules to better harmonize Medicare payments and provider purchasing patterns under the 340B program.

The 340B program was established to allow certain nonprofit safety net entities to purchase covered outpatient drugs at significant discounts. Because Medicare and Medicaid payment for drugs under the 340B program is not discounted, covered entities can realize sizable margins from drugs purchased at 340B program discounts. Covered entities are not restricted on how they use this spread.

Earlier in 2015, the Medicare Payment Advisory Commission (MedPAC) estimated that on average the 340B acquisition cost could be as much as 22 percent below average sales price (ASP). The Government Accountability Office also found that in 2012, average spending on Part B drugs in 340B hospitals was almost 2.5 times the spending in non-340B hospitals.

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