Effects of the 340B Drug Pricing Program on Florida Hospitals' Prescribing Behavior, Patient Mix and Quality of Care

In 1992, the U.S. Congress created the 340B Drug Pricing Program that requires drug manufacturers to provide outpatient drugs to eligible hospitals at significantly reduced prices. The goal of the program is to allow covered entities to reach more vulnerable patients and provide more comprehensive services. Covered entities, however, by law, are not required to pass on these drug discounts to patients or insurers. Therefore, a concern is that hospitals might prescribe a higher dose of drugs or more expensive drugs in order to generate higher profits, without increasing access to the intended population.

From the inception of the program, only certain Disproportionate Share Hospitals (DSH) could select to participate in the program. In 2010, Congress passed the Affordable Care Act (ACA), which further expanded 340B hospital eligibility to children’s hospitals, outpatient setting of free-standing cancer hospitals, rural referral centers, sole community hospitals, and critical access hospitals. While previous literature has examined the association between participation in the 340B program and hospital spending, no work has evaluated the impact of the ACA expansion. Using a difference-in-difference model based on the 2010 ACA expansion, I examine the impact of the 340B Drug Pricing Program on hospitals’ prescribing behavior, patient mix and quality outcomes.

Working with 15 million Florida hospital ambulatory visits from the Agency for Health Care Administration (AHCA) from 2005 to 2015, I find an increase of $109.8 in average medication spending per visit, which represents a 171% increase compared to the pre-policy mean of $64.16. Event study analysis indicates that the parallel trends assumption is satisfied. There are also heterogeneous effects of the program across different payers.

In addition, I find no significant change in the percentage of visits that are uninsured or charity. There is no change in either length of stay or abnormal discharge rates, defined as any patient end-of-visit disposition other than routine discharge to home; However, I find a significant decrease of 33.7% in post-operative adverse reactions, which suggests hospitals use some of the drug discounts to improve their quality of care.