Association of Beneficiary-Level Risk Factors and Hospital-Level Characteristics With Medicare Part B Drug Spending Differences Between 340B and Non-340B Hospitals

IMPORTANCE: Critics of the federal 340B Drug Pricing Program raised concerns that the program might provide financial incentives for participating hospitals to prescribe more and/or more expensive drugs because the revenue generated from Medicare reimbursement exceeds the purchase price by a substantial margin. Studies showing higher Medicare Part B drug spending at hospitals that are 340B hospitals, which can purchase outpatient drugs from manufacturers at discounted prices, compared with non-340B hospitals were used by the Centers for Medicare & Medicaid Services to justify their 340B payment policy that reduced Medicare payments for drugs in the 340B program in 2018 and thereafter. The Centers for Medicare & Medicaid Services attributed higher spending to the 340B benefit and believed that payment cuts would reduce the financial incentives associated with higher spending. However, the lack of sufficient risk adjustments is a significant concern of study validity. OBJECTIVE: To examine whether per-beneficiary Medicare Part B drug spending is significantly different between 340B and non-340B hospitals while adequately controlling for patient-level and hospital-level risk factors. DESIGN, SETTING, AND PARTICIPANTS: A cross-sectional study was conducted from October 1, 2020, to May 30, 2021, using 2017 administrative claims data from a random 5% sample of Medicare fee-for-service beneficiaries. Included beneficiaries had at least 1 separately payable non–pass-through drug claim in 2017, were fully enrolled in Part A and Part B through 2017, and did not die in 2017. MAIN OUTCOMES AND MEASURES: The outcome was separately payable Part B drug spending. RESULTS: The sample included 35 364 beneficiaries (21 825 women [61.7%]; 29 996 White patients [84.8%]; mean [SD] age, 70.6 [12.0] years) and 2446 hospitals. A total of 918 hospitals (37.5%) were in the 340B program and 938 hospitals (38.3%) were teaching hospitals. There was a higher percentage of teaching hospitals among 340B hospitals (517 of 918 [56.3%]) than non-340B hospitals (421 of 1528 [27.6%]), and beneficiaries who went to 340B hospitals were more likely to be non-White than those who went to non-340B hospitals (3360 of 19 139 [17.6%] vs 1583 of 13 710 [11.5%]). The Part B drug spending difference between 340B and non-340B hospitals was not statistically significant after controlling for beneficiary-level risk factors and hospital-level characteristics ($568; 95% CI, −$283 to $1419; P = .19). CONCLUSIONS AND RELEVANCE: The results show that the differences in patient population and hospital-level characteristics may explain drug spending differences between 340B and non-340B hospitals, which raises doubt about the financial incentive theory of the 340B program drug discount and the justification for the Centers for Medicare & Medicaid Services’s 340B payment policy.