A Government Accountability Office (GAO) report this week on the 340B Drug Pricing Program suggests hospitals have a financial incentive to prescribe 340B drugs and recommends that Congress take action to reduce these incentives – a conclusion America’s Essential Hospitals called “unfounded’ and troubling.

The GAO report responded to a request by congressional lawmakers several years ago for a comparison of financial characteristics and Medicare Part B drug spending by disproportionate share hospitals (DSH) participating in the 340B program and non-participating hospitals.

The GAO found that hospitals participating in the 340B program provide more uncompensated and charity care than their non-participating counterparts. The GAO also raised questions, however, about certain 340B DSH hospitals providing less charity care, particularly in an analysis of major teaching hospitals.

Regarding Medicare Part B drug spending, the GAO found that hospitals participating in the 340B program have significantly higher per-beneficiary spending than non-participating hospitals. It rejected a link between higher spending and patients’ health status, as well as other potential causes for the difference, and concluded, instead, that the differences must be explained by financial incentives. The GAO based its conclusion largely on a risk adjustment methodology that the Medicare Payment Advisory Commission has said “typically underpredicts the cost of the highest cost beneficiaries.”

The U.S. Department of Health and Human Services (HHS), in its response to the report, challenged the GAO’s methodology and warned that its conclusion is not supported by the analysis. HHS suggested additional examination, including whether differences in spending were related to better quality and outcomes or differences in where drugs are prescribed. Despite HHS’ challenge to the study’s validity, The GAO recommended that Congress consider “eliminating the incentive to prescribe more drugs or more expensive drugs than necessary to treat Medicare Part B beneficiaries at 340B hospitals.”

In a July 6 statement, America’s Essential Hospitals said it was “surprised and disappointed” by the report. “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.”

Contact Sarah Mutinsky, JD, MPH, deputy general counsel for America’s Essential Hospitals, at smutinsky@eymanlaw.com with questions.