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Statement on GAO Report on 340B Drug Pricing Program


Statement attributable to:
Bruce Siegel, MD, MPH
President and CEO
America’s Essential Hospitals

America’s Essential Hospitals is surprised and disappointed by today’s General Accountability Office (GAO) report on the 340B Drug Pricing Program. We are particularly troubled by the GAO’s unfounded conclusion that hospitals that serve our nation’s most vulnerable patients inappropriately prescribe medications to Medicare beneficiaries for financial gain.

We’re surprised not only by the lack of evidence and data for GAO’s conclusions and recommendations, but also by its suggestion that physicians in our nation’s essential hospitals would ignore patient needs to enrich hospitals.

GAO correctly found that 340B disproportionate share hospitals provide more uncompensated and charity care than their non-340B counterparts. These hospitals also serve sicker and lower-income patients who face a variety of social and economic challenges. But the report missed the mark on another of its key findings: higher per-beneficiary spending for Medicare outpatient drugs in these 340B hospitals compared with non-340B hospitals.

In its examination of higher spending and possible causes, GAO relied on a risk adjustment methodology the Medicare Payment Advisory Commission has concluded “typically underpredicts the cost of the highest cost beneficiaries.” But even this faulty risk adjustment showed 340B hospitals serve a sicker population. Nonetheless, GAO rejected a link between the higher spending and patients’ health status, leading the U.S. Department of Health and Human Services itself to warn the agency that its conclusion “is not supported by the analysis.” GAO also summarily dismissed other possible explanations for the differences in spending, including better quality and outcomes, different settings for drugs – for example, the likelihood that patients of non-340B hospitals more frequently receive drugs in non-hospital settings – and a counterbalancing reduction in inpatient spending.

But none of this stopped GAO from reaching unsupported conclusions and policy recommendations based on its faulty analysis, perhaps best highlighted by the report’s unnecessarily provocative title: “Action Needed to Reduce Financial Incentives to Prescribe 340B Drugs at Participating Hospitals.”

The more than 250 members of America’s Essential Hospitals care for complex patient populations with socioeconomic challenges that directly affect their health and that demand more intensive services than those for the average community hospital patient. The questions of how socioeconomic factors impact health and health care and how to adjust quality measures and payments to reflect these differences are highly complex and technical; researchers and policymakers alike have struggled to develop appropriate solutions. The GAO report brushes this complexity aside and leaps to the unsupported conclusion that financial incentives fully explain the differences in spending.

America’s Essential Hospitals is ready to work with GAO to develop an analytically sound approach to exploring differences in Medicare spending on drugs among different types of hospitals. This report falls far short of such an analysis.

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About America’s Essential Hospitals
America’s Essential Hospitals is the leading association and champion for hospitals and health systems dedicated to high-quality care for all, including the most vulnerable. Since 1981, America’s Essential Hospitals has initiated, advanced, and preserved programs and policies that help these hospitals ensure access to care. We support our more than 250 members with advocacy, policy development, research, and education.

Carl Graziano


About the Author

Graziano is senior director of communications for America's Essential Hospitals.

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