If there’s one universal truth in Washington politics, it’s that policymakers don’t want the public to know about well-intended government programs that have run amok. In March, the health subcommittee of the Energy and Commerce Committee in the U.S. House sought to change that by holding the first hearing on the “340B” drug discount program in nearly a decade. Haven’t heard of 340B? You aren’t alone, but it is one of Washington’s biggest and best-kept secrets.
The 340B program was created by the federal government in 1992 to provide discounted pharmaceutical drugs to the country’s poor, uninsured and most vulnerable. The program required Medicaid-participating drug manufacturers to provide discounted outpatient drugs to certain eligible health care entities, such as rural health centers, certain children’s hospitals and cancer hospitals. Those entities could contract with pharmacies to dispense drugs purchased through the program on their behalf.
Since its inception, though, the program has been abused and transformed into an unsustainable government program that allows qualified hospitals to reap massive profits from unaware patients. In 2013, a joint investigative report by The News & Observer and The Charlotte Observer found that “Duke University Hospital purchased $65.8 million in drugs through the discount program, which saved $48.3 million. It sold the drugs to patients for $135.5 million, for a profit of $69.7 million. The profit would have been $21.4 million if Duke had not participated.”
The report continued: “The number of U.S. hospitals participating in the 340B program has increased dramatically in recent years, from 591 in 2005 to 1,673 last year, according to the GAO.” No one is against the 340B-qualified hospitals making a profit. However, such a profit should not be made at the expense of needy patients who would benefit from access to discounted drugs.
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Unfortunately, the majority of 340B hospitals don’t even provide the national average of charity care to serve vulnerable and uninsured patients. A recent report from Avalere Health found that roughly two-thirds of hospitals participating in 340B provide less charity care than the average U.S. hospital, with charity care making up 1 percent or less of total costs at a quarter of those facilities.
This brings us back to the hearing in March. Finally, Congress is taking the first steps
to get this program under control. Under the leadership of Chairman Joe Pitts of Pennsylvania and North Carolina Reps. Renee Ellmers and G.K. Butterfield, the subcommittee directed the Health Resources and Services Administration to increase its oversight of 340B and ensure that patients benefit from the program. HRSA is expected to release new rules for the program soon.
This is not the end, though. The following changes must be made to contain and sustain the 340B program: The definition of “patient” for purposes of the 340B program should be strengthened to preserve the original intent. The qualifying criteria for 340B hospitals need to be calibrated to ensure proper identification of safety net facilities that serve large numbers of uninsured and vulnerable patients. The use of contract pharmacies, which enable covered entities to contract with multiple outside pharmacies to dispense drugs that receive 340B discounts, should fulfill the intent of the 340B program and directly benefit vulnerable patients.
Increased government oversight of the 340B program is needed to ensure program requirements, including prohibitions on drug diversion, are being met.
Bernie Reeves, founder and editor of five regional publications in the Triangle, was a Republican candidate for Congress in 2010.