There’s at least one unassailable fact in the battle over the federal 340B drug discount program: $1.6 billion is a lot of money.
That’s how much so-called safety net hospitals will lose from a Trump administration policy, announced last week, to slash reimbursement to providers in the 25-year-old program.
But other facts about the program are muddy. Supporters say the payments help pay for care of poor patients, and that without them more hospitals will shutter. Various hospital groups are now suing to stop the change from taking place on Jan. 1. Detractors, on the other hand, say the program is being abused by some hospitals that use it to increase their profits and market power.
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Does anyone really believe that the drug companies can give 50% discounts to these multi billion dollar hospital systems without inflating prices to everyone else? We are all too quick to beat up on the pharmaceutical industry while giving the huge “not for profit” health systems a pass – even though the hospitals make 10 times the margins on the drugs that most drug companies make. At least most of the drug companies are publicly traded with their financial statements being much more transparent and they pay taxes to boot. I pity the poor nursing home residents that have to pay $300 for a vial of insulin to subsidize the margins of the major health systems.
Thanks for the review. I have practiced cancer care (Medical Oncology) for 30+ years. You missed several types of abuses triggered by the lax enforcement of this program. Many of the hospitals were large metropolitan facilities (not rural or underserved). Several large medical centers bought small nearby rural hospital facilities so they could transfer the drugs to the nearby ‘city hospital’ up to 35 miles away. Many hospitals then bought up private practices, which had been traditionally lower cost options. Those practices could not compete when the hospital practice could operate without taxation AND purchase the most expensive supplies at 30-50% discount. Finally, those facilities commonly rewarded their CEOs with multi-million $ bonuses, largely derived from the 340B monies.
So, I don’t believe that this program has been as ‘good’ as you portray. It needs to be drastically reigned in and carefully assessed for all of the good and bad impacts.
There is a lot of concern over who is a ‘patient’. Some entities/organizations who serve ‘clients’, not medical patients, are abusing the 340b program by partnering with mail order 340b pharmacies to boost income, especially at smaller agencies. Some are offering gift cards to their clients when they switch from a legitimate 340b entity-such as a FQHC-based on-site Pharmacy- to the contracted, out of state Pharmacy. I believe, under scrutiny, these ‘clients’ will not be found to be patients under current definition.
Seems like one piece of the puzzle would be to prohibit hospitals and providers from charging more than the cost of a drug to anyone.
Can you name any businesses who charge ‘only the cost of their product’ and survive? Every business must, at some point, bring in monies to pay staff, physicians, taxes and rental. For cancer clinics the drugs are the highest cost (~80+%) in their operations. Most payers for cancer care underpay for staff, physicians, taxes and rental.
Agree that this article has some balance. What is missing is the huge benefit to safety net hospitals, to FQHC’s and to community health centers. 340B allowed many FQHC’s to afford pharmacy benefits for users who are almost all poor and those with limited health care access. On the other hand, there has been some abuse. The approach suggested seems like a typical Federal “meat axe” approach rather than addressing the real problem. From the article it seems the major concern is that the other hospitals are using the “profits” to purposes other than providing care to those with low income. Establishing rules for use of the fund generated could easily address this without the overall cuts. The changes also ignore two key underlying issues — the high number of those without coverage and the virtually unfettered greed of the pharmaceutical industry. Overall price regulation would address the latter and make 340B discounts less needed. The failure of the administration and the Republican majority in Congress to address ACA fixes that would expand instead of contract the number of those with coverage would go a long way toward addressing that issue.
Thank you for writing a reasonably balanced look at the 340B program. It’s simply not true that there’s “not a lot of support for this outside of the pharmaceutical industry.” Government oversight groups (OIG, GAO) have been at the forefront of recommending changes to the 340B program. Read the testimony from OIG and GAO at the July House oversight meeting:
https://energycommerce.house.gov/hearings/examining-hrsas-oversight-340b-drug-pricing-program/
I agree, it was great to read a balanced article on this site. We know that all programs/decisions are not 100% good or 100% bad and it was great to read about pros and cons for once. Thank you, Casey!