Side effects of a drug discount program

April 4, 2013 

Chuck Grassley is a no-nonsense Republican first elected to the United States Senate from Iowa in 1980, and even those who disagree with his typically grass-roots conservative politics acknowledge he may be the hardest-working person on Capitol Hill. When Grassley grabs ‘hold of an issue, he’s likely to investigate, then bring pressure to bear on the object of his investigation, and follow that with legislation.

Of particular interest to the senator is the health care system and all those parts of it that have to do with patient care and finances. The latest group to fall under the microscope: nonprofit hospitals participating in a federal program called 340B, which allows hospitals to purchase outpatient drugs at deep discounts, which in turn provides cheaper care for those who are financially hurting. Three North Carolina hospital organizations were among those an investigation ordered by Grassley covered, and the results are curious.

Grassley is questioning, when all is said and done, whether those hospitals and others are really passing along savings to patients, or whether they’re taking advantage of the discounts to boost their own bottom lines.

Consider the information regarding Duke University Hospital, as reported by The News & Observer and The Charlotte Observer. It bought $65.8 million under the program last year. It received $135 million in revenue. Duke reports it saved $48.3 million through 340B. More than two-thirds of Duke patients who got the drugs were covered by commercial insurance. Only 5 percent of Duke patients were uninsured. Insurers usually pay several times the cost of drugs.

The benefits

For its part, Duke (and others) says the savings are important because the money not spent for drugs goes to provide care for the poor, and for equipment and technology that benefits all patients.

That’s a pretty standard answer from nonprofits, and was often used in explaining high margins overall and inflated drug prices as examined by a five-part investigation published last April in The N&O and The Observer. That series showed that “nonprofit” wasn’t exactly a synonym for charity in the hospital business, where multiple hospital directors in the state made over $1 million in compensation and where bottom lines were often far from the bottom.

What is increasingly apparent as the newspapers continue to follow the issue is that patients seem, at least sometimes, to be just cogs in these behemoth hospital networks that are forever buying doctors’ practices, community hospitals, heart centers, and all kinds of the latest in diagnostic equipment in the name, they say, of providing better care, but certainly in the name of competition.

In the system

Duke competes with UNC, and WakeMed competes with everybody. The hospitals say it’s all part of the big-money, competitive nature of America’s health care system, where costs are out of control, insurance premiums are in a constant uptick and patients scramble to understand it all.

President Obama’s health care reform should at least give more people access to care with its insurance mandate, but keeping costs under control is a different matter. That will take more far-reaching reform and a mindset change in terms of, for just one example, emphasizing primary care and channeling more physicians in training toward that “speciality” instead of other, more narrow fields that pay better.

Grassley’s conclusion about the 340B program is that nobody’s watching it and someone should. He says the government agency charged with that oversight has to start holding hospitals to account when it comes to how their savings on drugs translates directly into savings for patients, not how the money saved, and the money made because of it, helps indigent care overall by making the hospitals financially healthy.

The senator’s view would be one step in a vast, complex health care system in need of overhaul, but at least it would be a step in the right direction.

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