Federal Drug Discounts Provide Stability Amid Crisis

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Like many other hospital systems throughout the U.S., Genesis HealthCare System here in southeastern Ohio started taking on water when the COVID-19 pandemic hit us. Were it not for the preparations of our dedicated health professionals and significant help from a little-known federal drug pricing program, we might have been sunk. 

Much of the focus on the COVID-19 public health emergency has been on large metropolitan areas such as New York, Detroit, and Los Angeles. But this terrible disease has impacted much more rural areas as well. Not-for-profit hospitals serving residents of rural communities are especially vulnerable to pandemics because we are more susceptible to shortages of vital drugs and medical equipment and have very thin operating margins. Combine a surge of emergency COVID patients with a sudden drop-off in patients scheduling the elective medical care that typically pays our care delivery bills, and you are looking at a financial crisis that could put a hospital like ours out of business at a time when our community needs it the most. 

That’s where the 340B drug pricing program can make all the difference. You might never have heard of 340B, but it is a federal program that offers vital discounts on prescription drugs to hospitals such as ours that treat a large percentage of patients living with low incomes or living in rural areas. The discounts come from drug companies, so they don’t cost taxpayers anything. But they are invaluable to hospitals trying to stretch their resources to care for everyone in the community. 

As COVID started making its presence known in our region, these discounts protected us. The savings we receive through the program enabled our network’s pharmacy team to anticipate and mitigate prescription drug shortages before they happened. And the financial support put us in a very good position to be able to ride out the storm during the period of time when we could expect our care delivery costs to swamp the amount of revenue that we were bringing in. 

The value of 340B during times of crisis is not a new phenomenon or one that is confined to one part of the nation. Health providers participating in the program in Puerto Rico, for instance, put their savings to good use to tackle a wide range of shortages in drugs, medical equipment, and health services following a pair of deadly hurricanes in 2017. This helped saved lives. The same is true for hospitals in California responding to the horrendous fires of 2019. 

It’s also important to realize that this program is there for us outside of these times of crisis. Genesis HealthCare is an integrated health care delivery system based in Zanesville, Ohio, that includes a not-for-profit hospital, multiple outpatient centers, and a large physician network. We are the largest health care provider in a six-county area, and we provide a much higher level of care than one might expect in a community of this size. Our comprehensive services include specialized care for patients living with cancer, respiratory conditions such as black lung, rheumatology disorders, and endocrine diseases. 

340B is a crucial element of our ability to offer these comprehensive services to all our patients, regardless of their ability to pay. Nearly three-quarters of our patients are on Medicaid, Medicare, or are uninsured. Each year, we provide more than $40 million worth of uncompensated care to patients who have no coverage or whose health plans do not cover the cost of their services, such as Medicaid. When you take into account the fact that our annual operating margin is about 1% in a good year, you can easily see that the roughly $25 million that our system receives in annual 340B prescription drug savings is a major element of the level of patient care and assistance we are able to provide. 

What would we and our patients do without this assistance? As we started going under water, we would need to make exceedingly difficult choices about what programs we would have to cut. The impact of these decisions would be felt the most deeply by our lower-income and indigent patients, many of whom simply would not be able to access the care they needed anywhere else in the area. When the COVID emergency starts subsiding and our region and the country can start getting back to normal, Genesis HealthCare will still be here for the patients we serve, and 340B will still be there for us. Our nation’s health care safety net relies on the program’s continued support. 

Matthew J. Perry is the President and CEO of Genesis HealthCare System

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