340B may curb high drug prices, new JAMA study finds

The 340B drug pricing program may discourage drug manufacturers from raising prices and instead may have the effect of reducing list prices for certain drugs. That’s according to a new study published in the Journal of the American Medical Association (JAMA).

Study authors Sean Dickson of West Health and Ian Reynolds of the Pew Charitable Trusts evaluated the effect of a recent decision by manufacturers to reduce the list prices of three important hepatitis C drugs (Harvoni, Epclusa, and Zepatier). The study’s key points are:

• The three hepatitis C drugs have a large 340B market share, 30 percent to 41 percent, compared with the average of 14 percent across all drugs in the Medicare Part D market. All three drugs experienced significant price decreases after launch, which is rare.
• It was financially preferable for manufacturers to lower their list prices so that they could pay less in 340B discounts and pharmacy benefit manufacturer (PBM) rebates.
• The larger size of the 340B market for these drugs may have made the difference. When the 340B market is closer to the average of 14 percent, it may make financial sense under a cost-benefit analysis for manufacturers to charge higher prices. But when the 340B market share exceeds 30 percent or 40 percent, the size of the discount is such that, combined with eliminating PBM rebates, drug companies bring in more revenue by decreasing their prices.

Manufacturers typically offer discounts on some of their high-priced drugs by providing rebates to PBMs rather than by lowering the drug’s list price. Manufacturers use this tactic in order to be included on insurers’ drug formularies and maximize profits.

However, high-priced drugs result in greater 340B discounts that manufacturers must provide to qualifying entities. As this study demonstrates, in cases where the 340B market share of a drug is significant, such as the hepatitis C market, it is more economically advantageous for a manufacturer to lower the list price of the drug and pay less in 340B discounts. This finding is in direct contrast to drug companies’ long-standing argument that 340B forces them to raise the list prices of their products.

340B plays an important role in bringing down drug prices, resulting in lower co-pays for patients treated at both 340B and non-340B institutions as well as lower costs for insurers and safety-net providers. As this study points out: “Proposals to reduce the size of the 340B program may therefore diminish the 340B program’s potential to restrain price increases or encourage list price decreases.”

Sourced from 340B Health: https://340binformed.org/2019/07/340b-may-curb-high-drug-prices-new-jama-study-finds/