The Effect of Medicaid Spending on the 340B Program

Medicaid spending cuts proposed by President Trump and Congressional Republicans Health Care plan would once again change the 340B landscape.

In 2010, under the ACA’s Medicaid expansion, more than 11 million uninsured people became newly qualified for benefits. As those patients began receiving care, the number of hospitals that qualified to purchase 340B drugs grew. The large number of new Medicaid recipients meant more and more hospitals qualified as “disproportionate share” allowing them to purchase drugs at 340B discount rates. And while there are prohibitions on States seeking Medicaid rebates on inventory purchased through the 340B Program, many state Medicaid programs do not have adequate systems in place to detect or prevent these duplicate discounts. This combination of additional covered entities, additional Medicaid patient populations, and a complicated system of state programs means that the number of duplicate discounts have also risen.

Now, between the Administration’s proposed budget and the pending American Health Care Act, it looks like Medicaid spending, and thus the size of the 340B program, is likely to change. If Medicaid spending is cut by $800 billion over 10 years, as the Administration’s proposed budget recommends, and/or if the Medicaid expansion is retracted, as Congressional Republicans are advocating, the number of Medicaid patients, covered entities, and resulting duplicate discounts are also likely to retract. Keep an eye on Congress, as they’ve pledged to deal with health care reform before the end of this year. While it is unclear as to whether this is practical, any changes they make will almost definitely have implications for the 340B universe.