Improving 340B Will Help Low-Income Patients

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In the litany of examples of how the U.S. health care system has become so broken, none is as instructive as the 340B Drug Discount Program. Once an obscure program that ensured that a few dozen safety-net hospitals and clinics could help low-income patients without suffering financially, it has become twisted into a “cash cow” for major healthcare systems that, ironically, incentivizes participants to put patients with commercial insurance first…and uninsured and Medicaid patients last.

It must be said upfront that the initial, frontline grantees perform a much-needed service and should be applauded for upholding the original intention of the 340B policy. The original intention of the 340B Program – created by Congress in 1992 – was to help uninsured and under-insured patients afford needed medication by requiring drug manufacturers to provide steep discounts to qualified programs, clinics, and hospitals. While there are many 340B clinics helping patients in need, such as those with HIV, the program does not always deliver its intended benefits.

At the inception of the program there were fifty 340B covered entities, or hospitals and clinics eligible for the program, that provided care to underserved populations. By 2019, the number of covered entities has expanded to over 12,000. The thousands of hospital-owned outpatient clinics would add to this total.

Today, far from caring for the underserved, there are 340B entities who actually sue patients who can’t pay their bills. Worse, 340B hospitals and their clinics are allowed to limit the number of Medicaid patients that they see.

This results in 340B clinics closing their doors to Medicaid lupus patients to usher in those with commercial insurance instead. South Louisiana, where I practice as a rheumatologist, is full of 340B hospitals, yet Medicaid lupus patients often cannot find an outpatient clinic that is willing to see them. The sour irony is my patients who are under-insured are seeing little if any of the benefits of the program.

Today’s crisis can be traced back three decades. When the 340B program was instituted, Congress was ambiguous about the intent of it, provided no clear definition of a qualified patient, and included no requirements or overseeing guidelines on how the covered entities should report their use of the money from the program.

Hospitals have taken advantage of this ambiguity. Starting in 2010, the government allowed eligible hospitals to contract with an unlimited number of pharmacies – including large, for-profit chain stores – giving those pharmacies access to those steep manufacturer discounts with no obligation to ensure the benefits are going to the neediest.

As a result, contract pharmacy arrangements have ballooned by more than 4,000% in the last decade. Many of these 340B contract pharmacies are owned by some of the richest companies in the health care system. “Contract pharmacies” were never mentioned in the original 340B law but were added later – again, with little oversight or transparency.

Here is how the 340B program works for covered entities and their partner pharmacies: drugs are purchased at a minimal cost set by statute. But there is no obligation to get those medicines in the hands of low-income patients. Indeed, hospitals and pharmacies profit the most when those low-cost medicines get reimbursed by commercial insurance and Medicare at much higher rates.

The annual profit that covered entities see from the 340B program totals in the billions of dollars, even as those business practices syphons money away from the Medicare system, which is already facing insolvency.

340B covered hospitals argue that they use savings from the program to take care of charity cases at their institutions. However, recent evidence has shown that hospitals participating in the program don’t provide differentially more uncompensated care compared to those not participating in the program. While broader access to cheap medicines through 340B sounds like a good thing, it only works if those in need see those discounts at the pharmacy counter.

Too often, they do not.

For patients to benefit fully from these steep discounts on their medicines, Congress must fix the holes in the program, investigate where the billions of dollars flowing through the 340B program go, and update the 30-year-old statute with transparency, fairness, and accountability for everyone in the program. 

To be clear, the 340B program is valuable and necessary for many patient populations. But there is a problem when a hospital gets steeply discounted drugs prices to take care of the disadvantaged, then turns around and sues patients who can’t afford their bills or turns away Medicaid patients from their clinics.

The proposals being hotly debated in Washington to increase patient affordability often focus on lowering the list prices of medicines. While this is a good step, it is also time to return to the original intention of the 340B program and ensure those who cannot afford expensive medications get the life-saving treatment they need.

Dr. Madelaine Feldman is a rheumatologist in private practice with The Rheumatology Group in New Orleans, LA. She is president of the Coalition of State Rheumatology Organizations (CSRO).

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