340B: Cronyism Run Amok


March 11, 2016 1:41PM

The road to hell is paved with good intentions. A little known federal prescription drug program—340B—is in need of dire reform. You can read more about this program in my piece in The Hill. Congress created this program more than two decades ago with the goal of helping poor and uninsured patients access discounts to prescription drugs, a noble goal indeed.

Alas, as with many federal programs, 340B has morphed into a massive redistribution of wealth program siphoning dollars from pharmaceutical companies to hospitals. The idea is that these “340B hospitals” would pass along the discount to poor and uninsured patients. However, many hospitals keep the discount without passing it along to poor or uninsured patients. Adding insult to injury, these hospitals can claim the discount on any outpatient whether or not they have insurance.

Here’s an infographic that further explains this process.

There are good actors who pass along the discount from this program, but Congress must add more oversight and reform to ensure that poor and uninsured patients actually receive the discount owed them.

Many 340B hospitals claim they utilize the discount to increase charity care, but right here in Tennessee 67% of these hospitals have charity care rates below the national average of 3.3%. So it naturally begs the question: what are the hospitals doing with this money? The program was never intended to be a revenue source for hospitals’ bottom lines.

340B abuse also encourages hospitals to buy independent physician practices in order to access deep discounts on expensive drugs and capture that revenue. In fact, a white paper by BRG Healthcare examined the affect of 340B on the Oncology Marketplace (i.e., cancer treatment):

The trend in acquisitions, driven in part by the opportunity for sizable profits on the reimbursement of expensive oncology drugs…will generate even more drug profits. As more oncology-related encounters are shifted out of the physician office setting and into hospital outpatient departments, costs to patients and payers (including Medicare) will increase due to both higher reimbursement rates in the hospital outpatient setting and greater drug utilization by 340B hospitals compared to both non-340B hospitals and community oncologists.

Congress must reform 340B, bringing additional oversight, accountability, and responsibility. The House Energy & Commerce Committee held a hearing on this topic and Tennessee’s own Congressman Marsha Blackburn lead a series of questioning. Her comments included questions about the rapid growth of 340B, accountability and oversight, definition of the patient and how these funds are distributed. It’s great to see Congressman Blackburn leading on this issue. Now, it will be up to the Senate HELP Committee—including our own Senator Lamar Alexander—to move forward with a hearing examining the program.