The paper inadvertently provides compelling evidence that the 340B Drug Pricing Program’s crazy incentives are lowering generic dispensing rates at retail pharmacies. The two lead authors work at Walgreens, which perhaps explains why they try (unsuccessfully) to spin the results away from this unfortunate conclusion.
With few exceptions, third-party payers and PBMs have been minimally engaged in the public policy discussion about how the 340B program should be modernized. Walgreens’ unexpected disclosures about cost-shifting to managed care suggest that they should start paying attention. Read on and see if you agree.
The chart below shows the generic dispensing rate (GDR) for the top five therapeutic categories with 340B prescriptions. In all cases, the GDR is statistically significantly lower for 340B prescriptions when compared with all prescriptions (p < 0.0001 for all comparisons).
[Click to Enlarge]
For covered entities, the greatest 340B rebates come from brand-name drugs. The Walgreens data support the idea that 340B entities encourage prescribing brand-name drugs when therapeutically equivalent generic alternatives exist. In other words, the 340B program reduces generic dispensing rate at contract pharmacies.
Here’s why this matters:
- Pharmacy Network Control—Today, one in four U.S. pharmacies is a 340B contract pharmacy. And the networks are getting bigger: Some contract pharmacy networks include almost 300 pharmacies in a single city. See One Percenters: The Real Facts Behind Hospitals' 340B Contract Pharmacy Mega-Networks.
- Influence over Pharmacies—By aligning with 340B entities, contract pharmacies are paid by them—rather than earning traditional dispensing spreads and fees. Third-party payers may not realize it, but the 340B program is hijacking their pharmacy networks, undermining their benefit design strategies, and generating extra profits for hospitals by raising payers’ costs.
- Cost-Shifting to Managed Care—The majority of 340B prescriptions are paid by Medicare, Medicaid, and commercial third-party payers. For example, Senator Charles Grassley’s inquiries have revealed that only 1 in 20 patients served by Duke University Health System’s 340B pharmacy was uninsured. The remaining 95 percent’s prescription costs were paid by Medicare, Medicaid, and private insurance. See Hospitals' Extraordinary 340B Pharmacy Profits from Insured Patients.
The article’s authors offer no clear explanation for the disparity in generic dispensing rates shown above. Here’s the best they can muster:
“[T]he specific medications dispensed in a therapeutic class may differ between 340B dispensing and overall dispensing because of variations in comorbidity and underlying severity of conditions between the two patient populations.”While this sentiment may explain utilization differences between therapeutic classes, it’s hardly compelling for explaining differences within a single therapeutic class.
I WAS IN THE POOL?
I’m slightly skeptical about the authors’ claim that 340B prescriptions accounted for less than 0.5% of all Walgreens prescriptions.
The paper states:
- "The sample included approximately 500 million dispensed prescriptions for patients of all ages and with all types of insurance coverage in the fifty states, the District of Columbia, and Puerto Rico."
- "340B prescriptions amounted to less than 0.5 percent of the approximately 500 million prescriptions dispensed by Walgreens in 2012."
- Walgreens' FY2012 10-K (for the 12 months ending 8/31/12) states: "Overall, Walgreens filled approximately 664 million prescriptions in 2012...Adjusted to 30-day equivalents, prescriptions filled were 784 million in fiscal 2012..."
- Walgreen's FY2013 10-K (for the 12 months ending 8/31/13) states: "Overall, Walgreens filled approximately 683 million prescriptions in fiscal 2013...Adjusted to 30-day equivalents, prescriptions filled were 821 million in fiscal 2013..."
"The study was based on a statistically valid sample of approximately 500 million prescriptions. The study criteria were equally applied to 340B and non-340B prescriptions."I’m still curious to know more about which prescriptions were excluded from the analysis and how these exclusions changed the results. Since 2012, the number of contract pharmacies has grown by 60%, implying that even the questionable 0.5% figure would be higher.
YOUR MOVE, SENATOR GRASSLEY
In 2013, Senator Grassley asked Walgreens for data about the drugstore chain’s profits from the 340B drug discount program. See Senator Grassley Grills Walgreens About Its 340B Profits. If the senator has received a response, it has yet to be made public.
Senator Grassley is likely to head the Senate Judiciary Committee in the new Republican-led Congress. I expect this Health Affairs article to feature prominently in his next request for details.