Drug Discount Program Strays from Patient Health to Hospital Wealth

BIOtech Now
Jim Greenwood

It’s been 25 years since Congress created the 340B Drug Discount Program, a program designed to provide uninsured and vulnerable patients with access to better health care and more affordable prescription drugs. As part of the law, drug manufacturers provide substantial discounts on outpatient medicines and treatments to select health care entities – often referred to as safety-net providers – who are then reimbursed by insurance companies at their regular rate. Participating hospitals are supposed to use the savings to expand or improve care for vulnerable populations. Over the years, however, there has been growing evidence that the program has expanded well past the intent of Congress and that vulnerable patients may not be seeing the benefits the program was designed to provide.

That the program is in need of reform is now beyond serious dispute. A new government- funded study in the New England Journal of Medicine (NEJM) is just the latest evidence demonstrating that 340B functions almost entirely as a source of revenue for hospitals, rather than as a benefit for vulnerable patients.

Because 340B hospitals profit so handsomely from the provision of certain drugs, particularly parenteral oncology and ophthalmology drugs that are infused or injected in clinical facilities, they have a strong financial incentive to grow those practice areas. Hospitals do this either by acquiring practices or employing more physicians in those specialties, allowing them to increase the volume of drugs dispensed, and with it, their 340B profits. The trend is problematic in several respects, not least of which is that providing such care in a hospital setting is much more expensive than in community physician practices.

This trend was examined by the Atlanta Journal-Constitution, which recounted a patient who saw his out of pocket cost for a routine cancer care visit skyrocket from $20 to $212 after his clinic was acquired by a hospital. His insurance company’s cost for the same visit also more than doubled, jumping from $2735 to $5661. This was for the same treatment at the same office he visited every month – the only difference being that his clinic was now part of a large hospital network.

The authors of the NEJM study set out to examine the effects of 340B on hospital-physician consolidation and the outpatient administration of parenteral drugs, as well as the provision of care for low-income patients at 340B hospitals.

Their findings were striking:

“We found no evidence of hospitals using the surplus monetary resources generated from administering discounted drugs to invest in safety-net providers, provide more inpatient care to low-income patients, or enhance care for low-income groups in ways that would reduce mortality.”

They concluded that “the 340B Drug Pricing Program has been associated with hospital–physician consolidation in hematology–oncology and with more hospital-based administration of parenteral drugs in hematology–oncology and ophthalmology without clear evidence of expanded care or lower mortality among low-income patients.”

The study comes on the heels of a recent Congressional review of the program which called for several reforms including:

  • Reporting requirements to promote transparency and accountability in the program;
  • Ensuring that low-income and uninsured patients directly benefit from the program;
  • Establishing a mechanism to monitor the level of charity care provided by covered entities; and
  • Reassessing the metrics which determine hospital eligibility for the program.

Recently introduced bipartisan legislation would be an important first step in reforming the program. The 340B PAUSE Act, introduced by Reps. Larry Bucshon (R-IN) and Scott Peters (D-CA) would institute reporting requirements to help Congress and regulators better understand how the program is operating. It would also put in place a two-year moratorium on new hospital enrollment while Congress examines other needed reforms.  A related bill was also recently introduced by Senator Bill Cassidy (R-LA).

While 340B hospitals tepidly claim to support “a thoughtful conversation about the transparency of the 340B program,” they have consistently opposed all efforts to introduce any accountability for how they use program savings. Let’s hope that Congress calls their bluff and takes action to reorient the program to promote patient health instead of hospital wealth.



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