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  • Writer's pictureJoshua Free

Lies Damned Lies, and Statistics

Like many quotes, we don't actually know who is responsible for this one. Some say Mark Twain, which I think is believable given his use of wit and humor. But maybe he got it from someone else first. Regardless, the truth in this phrase underlies the reason we've been using it for 100 years or more. And the theme here applies nicely to much of the reporting in the 340B program, wherein the statistics thrown around are highly misleading.


I'd like to believe that Mark Twain himself would have had a fun time poking at the nonsense of our healthcare system, especially the economics that drive it. Consider this recent report in Axios, which in itself is a summary of an Adam Fein piece in Drug Channels. Drug Channels certainly has a strong following, and some of the perspective represented there I agree with. It is, however, an editorial section and not a source of unbiased journalism as people sometimes think. Which is fine, my online content is ALSO an opinion page, so to speak. Informed, thoughtful perspectives need to be part of the dialogue on the various challenges we have. It's OK , in fact encouraged if you ask me, to read different viewpoints. Just consider the source, is all I'm saying.


When it comes to 340B content, Drug Channels represents a PhRMA industry angle, and Mr. Fein represents his clients well in that regard. There is heavy criticism of the 340B program, some of which is frankly deserved. Often the PhRMA industry viewpoint on 340B glosses over the many good things that come of the program and years of history behind how we got here. It's not fair to assume every DSH hospital is "abusing the program" any more than we should assume that every drug manufacturer has pulled a Vioxx-level stunt resulting in thousands of deaths, or a Purdue-level fraud that that has harmed untold millions. Drug manufacturers have done a lot of good, some could do better. The 340B Covered Entity universe has helped millions, but there's also been some issues. Name an industry or program that hasn't had that.


Where I draw the line is when PhRMA backed groups spread outright misleading information or try to rewrite the historical context and intent of the program. By all means, represent your side--but don't MISrepresent the other side in doing so. Case in point, the ongoing drama with contract pharmacy. The drug industry perspective is that there is rampant fraud, duplicate discount, profit-sucking middlemen, and that it isn't contemplated in statute.


There's another viewpoint here they don't like to entertain. HRSA audits look for this stuff, and the fact that we see enforcement actions shows the audits are working and not just a rubber stamp. Duplicate discount is a statutorily defined matter, and has ONLY to do with Medicaid Rebate--this does not extend to protect drug makers from commercial rebates. This is between manufacturers and PBMs...340B covered entities are easier to pick on though. States have authority in how they handle Medicaid Duplicate Discount, and this too is part of HRSA audits. Middlemen exist throughout healthcare, unfortunately. 340B Covered Entities would welcome help on that front, though the issue is probably overblown. And lastly, we have record of how the 340B statute came to be--the people who wrote the law are still around after all. And they can and have shared that reference to contract pharmacy was REMOVED from the language in the Veterans Healthcare act of 1992 because they felt it was obvious--not all covered entities have an in house pharmacy, after all.


Back to the Axios article--there are dubious conclusions drawn from the data that are out of context at best. If you follow me on LinkedIn, much of the below commentary is the subject of one of my recent posts.


1. "Safety-net providers bought a record $53.7 billion worth of medicines" under the 340B program, "a 22% jump over 2021..."


This implies that the 340B discount grew by 22%, which is false. This is simply the total net cost of all drugs purchased under 340B via wholesalers. The discount compared to usual cost is the important part.


Coverage on this topic notes that 22% is larger than the growth in drug price inflation. True, but out of context. The real rate of drug price inflation depends on which figure you want to use. If we mean net price including all rebates, that is a highly misleading figure. Pharmacies (including those in the 340B program) can't buy at that price, and patients don't see that price at the counter. Additionally, as those rebates grow, it potentially sets a new best price, which drives an even lower 340B ceiling price. So if manufacturers and pundits want to complain that 340B "grew" even though drug price net of rebates grew less, they're being disingenuous. Every time a manufacturer goes deeper on rebates (to be fair, not always their idea--thanks PBMs), they push the 340B price lower too.


Note that this number excludes products not routed through a wholesaler. Manufacturer direct purchases anecdotally include some very high cost drugs, and we have no visibility to how much that may have changed from year to year.


So did the actual value of the program leap by 22% in a single year? Absolutely not.


2. "The difference between list prices and discounted 340B purchases also grew $2.6 billion, to $52.3 billion."


OK, this number is more representative of what people are probably thinking of when we talk about 340B growth. If you follow the links in the article, this data isn't represented visually and the growth percentage isn't calculated. The previous year, the true 340B value, calculated as the difference between list price and 340B price, was $49.7B. So the ACTUAL growth in 340B program value was 5.2%. That's a far cry from the out of context 22% growth claim leading the article.


3. Let's keep in mind 1 huge key difference between 2021 and 2022--drug manufacturer restrictions and 340B ESP. By 2021 there were many restrictions in place, and many covered entities had yet to analyze the legalities of participating in data sharing under 340B ESP. By 2022, many were begrudgingly participating, and had gotten some of their contract pharmacy value back. You can see in the data that growth slowed a bit in 2021, and picked up again in 2022. Growth in 340B ESP data sharing could easily explain this.


4. Let's not downplay the growth in list prices--Purchases at 340B pricing grew by $9.8B, but list prices grew by $12.4B over the same timeframe.

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