Once again, the 340B Drug Pricing Program finds itself in the crosshairs of drug companies.
It makes sense, but not because the program is ripe with fraud or government waste. No, the real reason is drug manufacturers could not stop implementation of the Medicare drug price negotiation provisions signed into the law via the Inflation Reduction Act.
Fresh off multiple failed legal challenges to kneecap the negotiation powers of the federal government, drug companies are free to redouble their efforts to dismantle 340B. Give the drug makers credit, they found a new scapegoat: It is no longer the program itself, but how hospitals use 340B.
As the Senate Committee on Health, Education, Labor and Pensions assesses 340B’s growth and impact this week, opponents of 340B are arguing that hospitals exploit the program at the expense of patients. That premise is nonsensical. How can hospitals’ use of a drug discount program to underwrite patient care hurt patients? Newsflash, it cannot.
The entire reason for the program is to save scarce Medicaid and Medicare dollars, by having drug companies finance a portion of patient care by extending providers discounts on drug purchases. 340B provides quality, cost-effective care for medically underserved patients while simultaneously protecting taxpayer dollars. Budget hawks concerned with the national debt and deficit spending have spent decades alerting the public to the impending insolvency of federal government healthcare entitlements.
They have a choice: Stay true to fiscal conservatism or acquiesce to the priorities of pharmaceutical companies.
Many attacks on 340B—blaming hospitals or otherwise—rely on a rhetorical sleight of hand that juxtaposes annual sales in 340B with the federal prescription drug expenditures. Opponents stress that 340B sales outpace Medicaid drug spending and will soon surpass Medicare. There is just one problem: Sales to 340B providers are not the same as the federal government purchasing prescription drugs.
Unlike Medicaid and Medicare, the federal government does not underwrite 340B. No payroll taxes come out of anyone’s check. If drug companies get their way, they would curtail 340B, limiting the number of prescriptions they must offer at discounted prices. The result does not mean low-income patients would go without their medicines. On the contrary, drug makers will stick Uncle Sam with the tab, starving hospitals and other providers of savings they reinvest into care for low-income Americans.
Monocausal arguments offer weak reasoning that flattens complex issues. Blaming 340B hospitals for high drug prices overall is divorced from reality. Many reasons help explain why Americans pay more for prescription drugs than their counterparts in other wealthy nations.
Here are just a few: Our mixed public-private health care system, third-party payers instead of consumers managing most transactions, the regulatory burden that raises the costs of bringing drugs to market, the patent system and manipulation thereof, the interface between PBM/health insurance mega firms and drug companies, and the profit motives of drug manufacturers.
But 340B, whose total sales came in at $66 billion in 2023, or just nine percent of total prescription drug sales of $733 billion is neither a primary nor secondary macro cause of high drug prices overall. And does anyone think that if 340B suddenly vanished that drug companies would lower their retail prices to commercial insurers and the prices they charge the federal government?
The drug company lobby has a solution, but not for high drug prices. They have a legislative “fix” to reduce the number of prescriptions available at 340B prices. The ill-advised 340B ACCESS Act would devastate the ability of nonprofit hospitals to resource care. According to the American Hospital Association, the proposal could make 75% of current metropolitan 340B hospitals ineligible to participate in the program.
The math is simple: Fewer 340B providers means fewer discounted prescriptions. The previous discounted drugs would now be available at the retail price—the preference of drug companies. This guarantees that, however incremental, the average sales price of a given drug and drug prices overall would increase, contrary to pablum offered by the for-profit companies with an economic interest in higher prices.
Since 340B hospitals are in the spotlight, it is important to understand the value these nonprofits provide the broader healthcare system. 340B hospitals and their offshoot clinics provide quality cancer care to those with employer-based insurance and for many underinsured and uninsured patients as well. The savings from discount purchases on oncology therapies make that care possible. Without 340B, hospitals would lack the wherewithal to care for medically underserved cancer patients.
These are the patients that for-profit hospitals discard since they lack a commercial payer. Good luck painting 340B hospitals as villains. But hey, drug companies are welcome to try.
John Arcano is the senior manager of policy and government affairs at AIDS Healthcare Foundation.
