The 340B Program Pays for Uncompensated Care
Healthcare nonprofits find themselves in the crosshairs of drug companies bent on undermining the 340B program. Relentless attacks based on misleading comparisons have continued unabated.
It is not enough that drug companies want to renege on the deal they made with 340B, but they now want to turn lawmakers and the general public against a program which bolsters the healthcare safety net.
Charity care is laudable, but 340B offers much more
Drug companies often point to charity care percentages as a sleight of hand to diminish the value 340B nonprofits provide. The drug industry hopes to fool the public into thinking 340B nonprofits should be identical to St. Jude Children’s Research Hospital or Shriners Children’s Hospital, which provide charity care but derive the majority of their funding through donations. On the other hand, 340B nonprofits often receive below-cost reimbursements for the care they provide. Of note, for nonprofits to fill a prescription for a patient at a 340B price, they must have a prior relationship with the patient, meaning that the nonprofit already treats the person at a loss the 340B savings will help offset.
340B nonprofits primarily serve the most vulnerable Americans—from Ryan White clinics and rural health centers to urban Indian hospitals and tuberculosis clinics—and provide an array of uncompensated care to their patients. Drug companies have done everything possible to limit the number of drug discount purchases the 340B statute mandates they afford to nonprofits. Now, drug makers complain that 340B nonprofits do not provide savings directly to patients. Yet drug makers know that nonprofits use 340B savings to provide health services to under-insured and uninsured Americans.
340B protects low-income, uninsured Americans
Much of the recent 340B criticism focuses on large nonprofit hospital systems. According to data provided by the Health Resources & Services Administration, these hospitals account for the majority of 340B purchases in terms of sales value. In 2021, disproportionate share hospitals accounted for 78 percent ($34.2 billion of $43.9 billion) of 340B sales. Such a large share of purchases merits a closer look at the type of patients these hospitals serve.
Drug companies claim 340B hospitals serve wealthier communities, which would be an affront to the intent of 340B. But a 2019 study by L&M Policy Research found the patient population that is dual eligible for Medicaid and Medicare (e.g. poorer than other groups of seniors) is 48 percent higher at 340B versus non-340B hospitals. Shares of disabled patients came in at 37 percent higher than non-340B alternatives, while the percentage of patients who identify as Black was 69 percent greater at 340B than non-340B hospitals. In that sense, 340B often serves low-income, minority group populations which have, in the past, faced challenges attaining and maintaining healthcare.
For-profit healthcare providers price services to generate value for investors. These entities avoid or eliminate uncompensated care because it hurts their bottom line. Unlike 340B nonprofits, for-profit hospitals return much of their value to shareholders and as bonuses to executives who meet revenue targets.
But 340B healthcare delivery should not be synonymous with for-profit models that provide charity care out of their largess to earn positive press. Nonprofits use 340B savings to provide healthcare they know will cost more than reimbursements. Many services are not even revenue-neutral; they guarantee losses for 340B providers. And that’s the point: Nonprofits care about clinical outcomes, not profit margins.
No ambiguity exists in the original intent of lawmakers who developed the 340B program. The entire point was to help nonprofits stretch scarce federal resources to reach more eligible patients.
Nothing is stopping drug companies from offering additional savings to 340B-eligible patients. Drug makers are free to give away their products or reduce prices whenever they please. If drug makers want to provide extra savings on prescription drugs to nonprofit patients, 340B providers would welcome that beneficence.
John Arcano serves as policy analyst at AIDS Healthcare Foundation.
