The vast majority of hospitals that participate in the 340B drug pricing program do not follow recent hospital transparency regulations requiring them to report the prices they charge for oncology treatments and the rates they negotiate with private insurers, a new analysis found.
The report, from consultancy firm Moto Bioadvisors, revealed that 89% of 340B hospitals in the United States (964 of 1087) did not comply with the 2021 federal regulations. Although 30% (327) attempted to follow the new rules, only 11% of them (123) were adherent.
Senior analyst Ronny Gal, PhD, of Moto Bioadvisors, presented these findings at the Payer Exchange Summit on Oncology Payment Reform on October 25.
According to Ted Okon, MBA, executive director of the Community Oncology Alliance, which commissioned the report, “more and more analyses are showing that 340B hospitals are profiting immensely from oncology drugs, and in some cases, I think these hospitals are making the business decision to pay a paltry penalty of $300 a day [maximum] to not release their data.”
The federal government’s decades-long push to increase hospital price transparency has been controversial. Initially, the Affordable Care Act required hospitals to report their list prices, or “chargemaster.” The intention was to enable consumers to easily look up the cost of services or drugs and shop around for the best deal.
Although well-intentioned, numerous reports revealed that providing these prices ultimately did not help patients find more affordable, better-quality care or even understand their out-of-pocket costs. The realization prompted the Centers for Medicare Medicaid Services (CMS) to update the regulation so as to require hospitals to publish not only their chargemaster but also the prices they charge cash-paying patients and the prices insurers reimburse for these drugs. Hospitals that fail to comply can be fined as much as $300 per day, or $109,500 annually.
This change, which went into effect in January 2021, drew staunch opposition from hospitals. The American Hospital Association (AHA) tried to block the rule but lost the lawsuit and the appeal in late 2020.
In a subsequent letter to CMS, AHA president and CEO Richard Pollack wrote that “the hospital field is committed to providing patients with the information they need on their out-of-pocket costs,” but he argued that complying with these new requirements is “impracticable and often impossible,” especially in light of the constraint on resources hospitals are facing during the COVID-19 pandemic.
Data on Hospital Noncompliance
To determine how many 340B hospitals complied with the updated CMS requirements, Gal and colleagues from Moto searched for price transparency data from 1087 acute care 340B hospitals in the United States.
They found that almost 200 hospitals posted no price transparency file (18%). Of the 890 hospitals that did, 14 were not public. Of the remaining 876 hospitals, only 327 attempted to comply with the new regulations; of those, 204 provided incomplete data.
That left just 123 hospitals — 11% — that followed the new rules.
Even among the 123 compliant hospitals, the majority “did not provide well-organized and easy-to-read datasets,” according to Gal. The researchers found that files contained multiple entries for the same products and that product codes were listed under brand and generic drug names. In some cases, price information was hard to decipher; for example, some prices were listed by milligram or vial instead of by doses provided to patients.
The Price Transparency Controversy
Experts who support as well as those who oppose the final price transparency regulation have voiced a range of concerns.
Counsel for the AHA made the case that “even as CMS prepares to enforce the price transparency rule, hospitals lack clarity about how to implement it” and that hospitals will be hard-pressed to shift resources from the pandemic to implement the price transparency rule “before CMS begins launching compliance audits and imposing fines.”
The AHA took particular issue with the requirements to disclose the rates that commercial insurers negotiate with hospitals, calling those regulations “anticompetitive.” Some economists agree and say that revealing these rates could increase the price of drugs.
However, others argue that doing so would help insurers negotiate more aggressively and allow health policy researchers to develop better strategies to contain healthcare costs.
Simply put, according to Okon, “transparency brings down prices because it creates more competition.”
The Moto report’s deeper dive into the 123 compliant 340B hospitals also hints at why many may not want their drug pricing data and negotiations to be made public. The report revealed, for instance, that 340B hospitals charge a median 3.8 times a drug’s purchase price. The lowest median markup was 2.4 times higher, and the highest median markup was 11 times what hospitals pay. In other words, according to Gal, treating an average patient who has commercial insurance and is taking the multiple myeloma drug daratumumab generates almost 15 times more revenue to a 340B hospital than would the same treatment for a Medicare patient — $213,696 vs $14,259.
Gal noted that these markups make the “profit for treating commercial patients with cancer truly remarkable.”
CMS is preparing to increase the penalty for failing to comply with the price transparency requirements to as much as $5500 per day, or just over $2 million per year, for larger hospitals. Okon advocated going a step further increasing the penalty to $5 million or more a year as well as requiring that hospitals report these price data in order to be able participate in the 340B program in the first place.
However, as Gal noted, “transparency may not be enough here.” Even hospitals that are transparent “are still making large profits, so we might need a policy change to see a real change in drug markups.”