Amidst the swirl of conversations happening in Washington, D.C., and across the country on health care, there is an ongoing and important discussion about the 340B drug discount program. Created nearly three decades ago to serve as a safety-net drug discount program for America’s needy patients, the program is a prime example of well-intentioned policies that haven’t worked as planned and have resulted in patients paying the price through higher out-of-pocket costs.
Under 340B, pharmaceutical manufacturers are required to provide a discount on prescription drugs to qualifying clinics and certain safety-net hospitals – health care facilities that supposedly treat a large number of underserved needy patients. These facilities are then expected to use the savings to devote resources to assisting low-income, uninsured, or vulnerable patients. However, that does not always happen, and sadly the program has gone off track. That’s why this week, patient advocates, health care leaders, and members of Congress will join together in Washington to discuss how to best fix the program.
Poor oversight and a lack of clear program rules have led to the unchecked enrollment of large hospital systems, raising concerns about whether the savings from the program are being redirected to benefit the patients who are most in need.
To be clear, good actors within the program — such as federally qualified health centers (FQHCs) and other federal grantees — serve as the backbone of this critical safety-net by providing much-needed health care to patients who otherwise may not receive it. However, some bad actors within the program, particularly disproportionate share hospitals (DSH), have redirected benefits to increase their own bottom lines.
Financial incentives have led many DSH hospitals and hospital systems participating in the program to acquire independent physician clinics and other treatment practices. By doing so, these 340B hospitals can increase the volume of drugs they purchase at a steeply discounted price. They charge patients and payers the undiscounted price for the drug and keep the spread between the two prices. The 340B discount averages 50 percent, which can lead to 340B hospitals receiving payments that are more than double what they paid the manufacturer for the drug.
The 340B program has distorting impacts across the health care sector. The program is associated with hospital-physician consolidation, which shifts patient care away from the physician office into the more expensive hospital outpatient setting. In their 2018 physician benchmark study, the American Medical Association found that for the first time ever, employed physicians outnumbered self-employed physicians.
It’s also important to note that unlike safety-net clinics and federal grantees, such as hemophilia treatment centers and Ryan White Clinics that adhere to strict reporting requirements, 340B hospitals are not required to report to the government how they are using the program to help patients. This translates to a lack of accountability, which becomes clear when you look at the level of charity care 340B hospitals provide – care provided for free or at a discount to low-income patients. Among the new DSH hospitals participating in the 340B program for the first time in 2015, nearly 7 out of 10 had lower reported charity care levels relative to when they were not enrolled in the program. In fact, 64 percent of 340B hospitals have charity care rates below the 2.2 percent national average for all hospitals.
Because DSH hospitals, which represent only 9 percent of all 340B program participants, account for 80 percent of all 340B sales, the question then becomes: Who is benefiting? There is no evidence that it is vulnerable or uninsured patients. In fact, the New England Journal of Medicine found no clear evidence that hospital participation in 340B has expanded care to low-income patients.
The 340B program serves a critical safety-net role for our most vulnerable patients and communities. To make progress toward restoring the program’s original intent and ensuring its future sustainability, clear reporting requirements should be established for 340B hospitals. In addition, tighter rules around hospital eligibility are needed to make sure discounts are targeted to facilities that use the discounts to serve vulnerable communities.
When the 340B program works as intended, patients benefit, and public health outcomes improve overall. That’s why it is so important that patient advocates, health care leaders, and members of Congress are focused on how to get the 340B program back on track, and why common sense, federal action is needed to create greater accountability within the program so that it works better for the patients and communities that have come to rely on it.
Former Congressman Bob Dold is a spokesperson for the Alliance for Integrity and Reform of 340B (AIR340B), a coalition of patient advocacy groups, clinical care providers, and biopharmaceutical innovators dedicated to reforming and strengthening the 340B program.
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