Gilead Funds BRG Study Taking Aim at 340B Grantees

 

On May 22, 2023, the Berkeley Research Group (BRG) published a “study” titled “Federal Grantee Clinics and the 340B Drug Discount Program” funded by Gilead Science, Inc. (Gilead). The unstated message of the article is that drug manufacturers’ 340B reform efforts should be directed at grantees, not just hospitals. The BRG publication purports to provide facts about grantees and the 340B program but creates “statistics” based on unfounded estimates and assumptions leading to the study’s conclusion that grantees are misusing the 340B program without a clear benefit to patients or transparency in grantees’ use of the program.

 

Gilead is one of the prominent producers of antiretroviral medications to treat HIV and pre-exposure prophylaxis (PrEP) medications. In the last two years, Gilead cut pharmacy reimbursement for its HIV and medicines for uninsured individuals through Gilead’s Advancing Access patient assistance program. Gilead also created a requirement that 340B covered entities with contract pharmacies register and provide claim level data via 340B ESP in order to access 340B discounts for hepatitis C drugs. BRG has issued a series of articles, often in the guise of studies, that are highly critical of the 340B program including several authored by Aaron Vandervelde, an outspoken critic of the 340B program who is the managing director of BRG and founder of 340B ESP.

 

The publication concludes that while the focus on 340B “reform” has centered on hospitals, similar “growth trends and financial dynamics . . . also apply to grantees.” The publication asserts that “without greater transparency it is unclear to what extent federal grantee clinics depend on the drug margin earned from the 340B program to fund their operations, whether patients benefit from these funds, and whether this is a sustainable approach to funding these services going forward.” The publication makes one brief mention, in the last paragraph, of the reporting requirements already applicable to federal grantees but complains that “this reporting is generally not publicly available.”

 

While the BRG publication acknowledges that their numbers and conclusions are based on assumptions and estimates, it is unapologetic in its attack on the 340B program and on grantees’ use of the program. The publication:

  • Suggests that the growth in the use of contract pharmacies and margins that grantees realize on 340B drugs are problematic.
    • The study does not acknowledge that the use of contract pharmacies is intended to increase access to 340B drugs or that grantees are obligated to use revenues that they receive to support the purposes of their grants.
  • Cites an Apexus statistic that 340B grantees account for about 13% of 340B sales at the discounted price and alleges that the percentage would be larger if measured by the undiscounted price. States that the growth rate between 2017 and 2022 for use of contract pharmacies was 252 percent for grantees as compared to 194 percent for hospitals.
    • The paper assumes, without facts to support the claim, that grantees tend to use higher-priced drugs and that use of contract pharmacies for grantees is greater than for hospitals.
  • Reviews use of 340B drugs dispensed to Medicare Part D beneficiaries and then extrapolates these findings to other payers.
    • The publication admits that the figures assumed that a grantee purchased a drug if the prescriber was “affiliated” with the grantee and the drug was purchased through a contract pharmacy or in-house pharmacy of the grantee.
  • An appendix to the “study” lists other unfounded assumptions and estimates that were used to arrive at the allegations that margins on 340B drugs for grantees are about 3.7 times the discounted 340B price.
    • According to two GAO reports, 340B discounts only result in savings ranging from 20 to 50 percent.  See 2020 Drug Pricing GAO Report at 1; 2011 Drug Pricing GAO Report at 2. These percentages call into question the credibility of BRG’s estimate that grantee margins are 3.7 times the 340B price.
    • If the 340B price is merely 50 percent of the non-340B price, it is difficult to fathom how 340B grantees are generating the large margins that BRG alleges.
  • Based on these assumptions and estimates, the publication reports that grantees gained “between $8 billion and $12 billion in 340B drug margin in a single year.”
    • The study fails to acknowledge that federal grantees are required to use these revenues to support the purposes of their federal grants.
    • Gilead reported revenue of $27.3 billion in 2022, 65% percent of which is attributable to HIV-related products. Being generous in accepting the underlying assumptions, grantees were receiving discounts representing merely 3% of Gilead’s profits.