Recent court ruling could increase the size and administrative complexity of the 340B program

The 340B program allows certain hospitals and clinics to use outpatient drugs purchased at substantial discounts on insured patients, generating profits to fund care. The size of these profits depends on the number of prescriptions filled by participating hospital or clinics' insured patients that also meet the Health Resources and Services Agency's definition of an eligible patient. A recent court case has challenged the Agency's longstanding definition of a patient, resulting in new definition that could significantly expand the size of the program and create conflicts when an insured patient satisfies the new definition for more than one hospital or clinic participating in the program. We use Medicare Part D data from 2018 to simulate the proportion of prescription drug fills eligible for 340B discounts and total program spending under both existing and new definitions. We found that the new definition could increase the share of 340B-eligible fills in Medicare Part D by 25%, from 12% of fills to 16%, and that the share of fills subject to a conflict could double, from 1% of fills to 1%-2%. Our results suggest that the new definition could increase covered entities' 340B profits by roughly a third.