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Tags: helthcare | drug savings | underserved | patients
OPINION

Incompetence, Abuse Comprise 340B Health Program

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Sally Pipes By Wednesday, 25 October 2023 09:45 AM EDT Current | Bio | Archive

There's a paradox at the center of American healthcare policy. The government will spend just shy of $2 trillion subsidizing healthcare this year — including over $500 billion on Medicaid and the Children's Health Insurance Program. But low-income Americans still struggle to afford care.

According to one recent poll by the Kaiser Family Foundation, nearly seven in ten Americans earning less than $40,000 a year find it at least somewhat difficult to pay for healthcare.

One lesson to draw from these figures is that the federal government is exceedingly bad at alleviating the health cost burden that low-income people face.

For a case study in how well-intentioned federal policy can go astray, look no further than the "340B" program.

Congress established 340B more than three decades ago as a way to help healthcare facilities in underserved communities provide more comprehensive care to poor patients. In the years since, however, providers have begun gaming the program on a massive scale, using it to line their own pockets at the expense of underprivileged patients.

In essence, 340B transfers resources from the pharmaceutical sector to certain "safety-net" providers throughout the country. The program requires drug companies to offer steep discounts on brand-name medicines to these facilities. Hospitals and clinics can then use that money to provide more and better care to patients.

At least, that's the idea. Unfortunately, there is a foundational flaw in the program's design. As a recent report from the Government Accountability Office states, "the 340B Program does not dictate how covered entities should use [the] revenue" stemming from their sizable drug discounts — an oversight that providers have gladly exploited.

What are hospitals and clinics doing with their drug savings to serve struggling patients? Is it now a practice for them to simply pocket the money as profit? This is a question which must now be asked.

The evidence for this has been mounting for years. A 2021 analysis by the organization I lead, the Pacific Research Institute (PRI), found that 340B hospitals devote just 1.66% of net patient revenues to charitable care. The typical hospital, meanwhile, spends 2.03%.

At the same time, the amount of business conducted through 340B is at record highs. Last year, hospitals and clinics purchased $53.7 billion in discounted drugs through the program. That's an increase of 22.3% from 2021.

The estimated value of the discounts from those purchases was $52.3 billion — a roughly 50% discount from drug list prices.

In short, hospitals have been taking advantage of 340B to buy drugs at a massive discount, selling those drugs at a considerable mark-up, and seemingly keeping the bulk of the difference for themselves. Exactly how lucrative is this?

In fact, PRI's analysis found that 340B hospitals are more profitable than average hospitals.

Such self-dealing behavior doesn't just subvert the intended purpose of the program. It harms the very patients 340B was created to serve. Drug companies don't just eat the generous discounts they must provide to qualified hospitals and clinics. They raise prices on their latest medicines to recoup the cost of the largesse that the federal government requires under 340B.

In the end, it's low-income patients who suffer the most from those higher prices. In many cases, their copays and cost-sharing obligations are based on the higher list prices brought about in part by 340B.

Abuses in 340B are no secret, of course. Just last year, a New York Times investigation looked into the finances of one of Virginia's most profitable hospitals, Richmond Community, and found that 340B was responsible for the "vast majority" of those profits.

To his credit, Sen. Bill Cassidy, R-La., — a medical doctor and the ranking member of the Senate Health, Education, Labor and Pensions Committee — has announced a new investigation into 340B. He's sure to turn up yet more evidence of the abuse that pervades the program.

The fact that such abuse has been allowed to continue for so long is proof enough of the federal government's fundamental incapacity to look after the interests of our most vulnerable patients.

Sally C. Pipes is president, CEO, and the Thomas W. Smith fellow in healthcare policy at the Pacific Research Institute. Her latest book is "False Premise, False Promise: The Disastrous Reality of Medicare for All," (Encounter Books 2020). Follow her on Twitter @sallypipes. Read Sally Pipes' Reports — More Here.

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SallyPipes
In short, hospitals have been taking advantage of 340B to buy drugs at a massive discount, selling those drugs at a considerable mark-up, and seemingly keeping the bulk of the difference for themselves. Exactly how lucrative is this?
helthcare, drug savings, underserved, patients
720
2023-45-25
Wednesday, 25 October 2023 09:45 AM
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