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Government Audit: Doctors Are Overprescribing Drugs to Get Medicare Cash

Report finds flaw in 340B program

A Medicare program designed to offset costs at hospitals serving the poor is likely prompting physicians to over-prescribe drugs to their patients, according to a report from The Hill.

Hospitals that participate in Medicare’s 340B Drug Pricing Program –– launched in 1992 –– are prescribing either more drugs or more-expensive drugs to their patients compared with hospitals that don’t qualify for the program, a new federal audit has found.

Spending is about $144 per patient at the 340B hospitals — more than twice the $60-per-patient spending at hospitals without the program. The differences in treatments could not be “readily explained by hospital characteristics or patients’ health status,” the report found.

Members of the Medicare Payment Advisory Committee (MedPac) –– part of the Government Accountability Office (GAO) –– urged Congress to take action because the health officials don’t have the power to lower the incentives.

Hospitals are allowed to participate in the 340B program if they treat larger numbers of low-income patients. Those hospitals receive a minimum discount of approximately 22% of the average sales price for drugs, according to the MedPac report.

Spending by 340B hospitals has exploded in the last decade, growing from $500 million in 2004 to about $3.5 billion in 2013.

The financial benefits reaped by hospitals “poses potentially serious consequences to the Medicare program and its beneficiaries,” MedPac wrote. Extra spending is harmful to the Medicare program as a whole in addition to patients, who face larger copays because of the more expensive treatment, according to the report.

 The drug-pricing program includes approximately 40% of all U.S. hospitals. It uses a formula that pays hospitals regardless of how much they have paid for the drugs, creating an incentive for hospitals to prescribe their most expensive drugs to maximize revenue from the program.

Sources: The Hill; July 6, 2015; and MedPac Report; May 2015.


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