A silent crisis is brewing in rural America. Many patients in these communities are unable to pay for their healthcare and rural hospitals, the lifelines of many small towns and their residents, are grappling with financial hardships that threaten their very existence.
Recent economic conditions created by the loss of patient revenue, inflation, and a reduction in public and private funding have resulted in nearly 8% of the nation’s 1,800 rural hospitals closing in the last two decades. That trend is now at risk of spreading further across post pandemic America as more than 33% of hospitals in the United States are operating on negative margins and struggle to absorb the increased costs of labor and drugs and meet the needs of the 8.3% of Americans without health insurance.
As representatives in Washington D.C. examine and debate ways to solve this multitude of problems, it is important that they promote policies that make health care more affordable and accessible. This is especially true for patients in rural communities hardest hit by the pandemic and current economic conditions. One such program is the 340B Drug Pricing Program, first established by Congress in 1992 to support safety-net hospitals and other providers that serve vulnerable patients. Today, it acts as a lifeline between rural hospitals and the communities they serve.
The 340B Drug Pricing Program allows for approved “covered entities” to purchase pharmaceuticals at a discount from manufacturers. In turn, the savings from these discounted drug purchases provide rural hospitals and other facilities serving vulnerable populations with the financial support that enables them to provide more comprehensive services and charity care. The strong bond between patients and providers created by the 340B Drug Program has been invaluable for preserving a safety net for beneficiaries.
There is no doubt the 340B program has grown over the years, but so has its need. With more than one-third of Americans having to skip filling a prescription due to cost concerns, access to the free and discounted medicines the 340B program provides patients with a critical service. As a result, drug purchases increased from about $4 billion in 2007 to $38 billion in 2020. While that seems like a lot of money, it represents less than 3.6% of total U.S. drug sales. The program is also vital for the treatment of chronic diseases that disproportionately affect low-income patients and to help combat medication nonadherence which is a major driver of healthcare costs that some estimate to be at $300 billion annually.
The key point made by providers is that the 340B program is not only a good deal economically, but also an effective health care program that saves money. Yet drug makers assert that the program is too expensive and are taking steps to pass legislation to restrict the program. A bill known as the Drug Pricing Transparency and Accountability Act (HR 198)would make significant changes to the 340B program, such as establishing a two-year moratorium on enrolling new hospitals in the program and instituting new and burdensome requirements.
While some stakeholders argue that more oversight may be needed, these hospitals are already meeting a high standard of scrutiny. They already serve a high volume of low-income patients and complete rigorous audits. Requiring more frequent recertification and even stricter audits, as the bill would require, is not only duplicative and increases overhead costs, but also unnecessarily punishes the small and financially vulnerable facilities that most need the 340B program.
No one will argue that Congress has oversight responsibility to ensure that the 340B program is operating as originally intended, especially related to waste, fraud, and abuse. But representatives in Washington also need to know that bowing to the interests of a small group of stakeholders without regard to the overall impact of those policies can make the very problems they are trying to solve worse. As such, they should avoid taking narrow and overly aggressive actions that could arbitrarily increase the financial burden on the patient and the medical providers, bury small rural hospitals in mounds of bureaucratic red tape, and ultimately destroy the benefits that patients and providers have come to expect and need.
Brenda Destro, Ph.D. served as the Acting Assistant Secretary for Planning and Evaluation at the U.S. Department of Health and Human Services (HHS) from 2018-2021 and was previously a Senior Public Health Advisor to the Senate Committee on Health, Education, Labor, and Pensions (HELP)
