Most drugmakers ignoring 340B inpatient option

July 10, 2006

Most drug manufacturers are turning thumbs down on a new opportunity to provide inpatient drug discounts to safety-net hospitals. According to a Public Hospital Pharmacy Coalition report, hospitals are getting the optional discount on just 12% of brand-name drugs purchased for inpatient use. "Some companies have stepped up to the plate," said PHPC executive director Ted Slafsky, "but most have not."

Most drug manufacturers are turning thumbs down on a new opportunity to provide inpatient drug discounts to safety-net hospitals. According to a Public Hospital Pharmacy Coalition report, hospitals are getting the optional discount on just 12% of brand-name drugs purchased for inpatient use. "Some companies have stepped up to the plate," said PHPC executive director Ted Slafsky, "but most have not."

PHPC estimated that discounts not offered add $2 million to the annual drug spend for hospitals serving low-income populations. "We thought this provision would be a great opportunity to stretch inpatient drug dollars and give drug manufacturers and their products a position in major teaching institutions," said Diana Bond, pharmacy director at the University Medical Center of Southern Nevada.

Amgen, AstraZeneca, Mallinckrodt, and Pharmion are offering 340B discounts on some or all of their branded products, Slafsky said. A number of generic drugmakers are also offering discounts. Most brand-name manufacturers have opted not to participate, he added.

"Offering 340B prices on the inpatient side is just being a good corporate citizen," said Pharmion spokeswoman Breanna Burkhart. The company offers DSH inpatient discounts on its two U.S.-approved products: Innohep (tinzaparin), a new low molecular weight heparin; and Vidaza (azacitidine), a drug used to treat myelodysplastic syndromes. "Because the discount comes under 340B, it does not affect our average sales price or the pricing parameters for other sales," she said.

None of the nonparticipating drugmakers in 340B inpatient programs returned our telephone calls.

"Inpatient DSH pricing can be more complex than discounts in the 340B outpatient setting," said Chris Hatwig, senior director of the 340B Prime Vendor Program. The PVP negotiates subceiling outpatient prices for 2,500 340B hospital clinics, health centers, and other 340B facilities around the country. Unlike the 340B program, the PVP has no prime vendor to negotiate DSH inpatient purchases nationwide. Every drugmaker wishing to offer inpatient DSH pricing must negotiate separately with each hospital or group purchasing organization representing the hospital.

Maintaining current margins is also an issue for most drugmakers. The total 340B pharmacy market is approximately $4 billion out of $240 billion spent on Rx drugs annually, Hatwig said. Many manufacturers have little interest in further reducing their margins. Generic houses and branded manufacturers in highly competitive markets are more willing to offer additional discounts to boost market share and product awareness.

It makes good business sense for Pharmion to discount in order to establish its products in the marketplace, Hatwig said. Sanofi-Aventis has less incentive to discount competing Lovenox (enoxaparin), which already has about 90% of the 340B market for low molecular weight heparin.

That analysis seems to suit the Pharmaceutical Research & Manufacturers of America, which does not oppose voluntary discounts. But senior VP Ken Johnson said in a written statement that the group opposes any move that would expand or impose price controls on pharmaceuticals. PhRMA's opposition includes mandatory inpatient 340B pricing.

Senators John Thume (R, S.D.) and Jeff Bingaman (D, N.M.) have introduced legislation that would require drugmakers to offer 340B pricing for inpatient use. Representatives Jo Ann Emerson (R, Mo.) and Bobby Rush (D, Ill.) have introduced similar legislation in the House. Both bills have attracted multiple cosponsors, and both are stalled in committee.