Access to the 340B Drug Pricing Program: is there evidence of strategic hospital behavior?

Karen Mulligan,Rebecca Myerson,John A Romley

doi:10.1186/s13104-021-05642-4

Abstract

ObjectiveThe 340B Drug Pricing Program allows hospitals to purchase covered drugs at a discount and potentially generate profit if they are reimbursed at rates that exceed 340B acquisition prices. Disproportionate share hospitals (DSH) are eligible to participate in 340B if their DSH adjustment–a measure that identifies hospitals that treat a disproportionate share of low income Medicare or Medicaid patients–is above 11.75%. To assess whether hospitals behave strategically to gain access to the program, we examined data on the number of hospitals just above versus below the DSH adjustment threshold for 340B eligibility and conducted McCrary density tests to assess statistical significance.ResultsIn 2014–2016, the number of hospitals increases by 41% just above the 340B eligibility threshold. McCrary density tests found this increase to be statistically significant across a range of bandwidths in 2014–2016 (p < 0.01). From 2011–2013, the findings are sensitive to the bandwidth around the threshold, but insignificant in 2008–2010. We found no comparable change among hospitals ineligible for the 340B program. These data are consistent with the hypothesis that some hospitals adjust their DSH to gain 340B eligibility. Our findings support recent calls from the Government Accountability Office to improve oversight of the 340B program.

Highlights

The 340B Drug Pricing Program was established in 1992 to enable covered entities, including hospitals, to stretch scarce federal resources by allowing them to purchase covered drugs at an estimated 20–50% discount [1]
This paper documents an increase in the number of hospitals whose disproportionate share (DSH) is just above the 340B eligibility cutoff
This increase at the cutoff is significantly larger than what would be expected by chance alone in 2014–2016; there is suggestive evidence of an increase in 2011–2013, and no evidence of an increase prior to 2011. These patterns are consistent with a hypothesis that some hospitals adjusted their DSH to gain 340B eligibility, this is a fairly recent phenomenon

Summary

Results

McCrary density tests found a significant increase just above the 340B eligibility threshold in 2014– 2016 (p < 0.01). This finding was present for all bandwidths examined. The McCrary density test did not identify significant changes in the number of hospitals at the 340B eligibility threshold prior to 2011. Our findings were robust to dropping states that expanded Medicaid eligibility (Fig. 2) While this suggests Medicaid eligibility expansions do not explain the increase in hospitals just above the threshold in 2014–2016 for the full sample, we cannot rule out the possibility that Medicaid expansions impacted hospitals in non-expansion states that are located near the border of an expansion state

Introduction

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Discussion

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