Cuts to Drug-Pricing Program Put Safety-Net Hospitals at Risk

In his efforts to control the dramatic rise in drug prices, President Donald Trump and his administration have put forward a number of promising proposals that could save patients and providers money. But the issues raised about the 340B drug-pricing program would move us in the wrong direction.

Americans are justly concerned about the ceaseless rise in drug prices. Major manufacturers have announced new price increases. For example, Bayer AG has raised the prices on two cancer drugs by more than $1,000 a month. A Wells Fargo & Co. research note said that although fewer drug price increases happened in May, there were still dozens of increases. These increases and others like them tax the ability of patients to afford their medications and limit hospitals’ capacity to care for low-income patients in need.

Since 1992, the 340B drug-pricing program has required drugmakers to discount their prices when they sell to nonprofit and public hospitals that serve significant numbers of low-income and rural patients. The savings from those discounts allow these hospitals to provide 60 percent of all uncompensated care in the country despite representing 38 percent of all hospitals.

The Trump blueprint asks whether changes to this critical program could reduce drug prices and save patients money. The truth is, those changes would raise the cost of drugs to safety-net providers that care for low-income and rural patients, and they would do nothing to lower drug prices.

Restricting the 340B program would take financial resources away from hospitals that treat high volumes of low-income and rural patients and put more money back into the pockets of manufacturers. The administration already has cut $1.6 billion in Medicare drug payments to many 340B hospitals and proposed reducing payments by an additional $1.6 billion in 2019.

A new report from S&P Global Ratings, the world’s top independent credit risk researcher, concluded that “the impacts of the cuts to the 340B Drug Pricing Program on not-for-profit hospitals that rely on 340B drug savings will likely weaken their operating performance at a time of already tightening margins.” Such actions would make it more difficult for facilities to expand the care they provide in their communities, maintain the level of care they already provide, or even to operate at all.

A recent study from the Pew Charitable Trusts said some hospitals might be forced to withdraw from the 340B program as a result of the Medicare cuts and warned the net effect of the cuts “would be to transfer Medicare spending from the 340B hospital to the pharmaceutical manufacturer.” Surely, increasing revenue for manufacturers is not the intended outcome of policies to rein in drug prices.

Pharmaceutical companies have spent millions on a campaign to hamstring the 340B program and distract policymakers from the real source of the problem. Only one group now can decide how high drug prices go — the manufacturers themselves.

This debate is about much more than credit ratings, balance sheets and budgets — it’s about patients. Take, for example, the story of Kathleen Cavanagh from Caldwell, Idaho. She had no idea how she was going to afford medications for her multiple medical conditions — including type 1 diabetes, asthma, high blood pressure and bipolar disorder — until St. Luke’s Humphreys Diabetes Center in Boise told her about its 340B program. The program covered her drugs at no cost and provided vital support services that have helped her improve her health. Kathleen recently reported that she has stayed out of the hospital and has cut the number of medications that she takes regularly by a third.

It is precisely because of patients like Kathleen that we cannot ignore the cold, hard financial reality posed by 340B program funding cuts and the prospect of additional rollbacks to come. Policymakers need to focus on the core issue of high prices and not be distracted by drug industry efforts to shift the blame away from their actions.


Maureen Testoni is the interim president and CEO of 340B Health, which represents more than 1,300 hospitals and health systems participating in the 340B drug-pricing program.

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