An Abused Drug Discount Program

Health care is a huge industry, and there are many oddball programs within it.  One is the 340B program, created in 1992 to help low-income uninsured patients get better access to drugs through health care providers that serve large numbers of the poor.  A recent report gives a good background on the program and questions whether it is being used as intended.  (340B Report)  It should be noted that the sponsors of the report are groups that would benefit from limitations on the program, as they could charge higher prices in its absence.  Two key definitions in the program appear to be ambiguous, the types of patients intended to be reached and the types of providers eligible to get the discounts.  Drug manufacturers must give the mandated discounts to eligible providers or the manufacturer cannot participate in Medicaid.  In the period from 2005 to 2011 the number of hospitals participating in the program tripled and almost a third of hospitals are now in the program.  The total number of sites covered by 340B has doubled in ten years.

Purchases of drugs under the program have risen rapidly also, to $6 billion in 2010.  There are concerns, expressed by GAO as well, that participating providers may be interpreting “patient” to include people who not really under the care of the provider, that insured individuals may be included and that the patients may not be getting the benefit of the discounts.  To the extent that there is inappropriate growth in use of drugs under the program, costs may be shifted to other payers to make up for the discounts under the 340B program.  While providing affordable drugs to poor people appears to be a worthy goal, it is unclear why the 340B program is necessary at all with the extent of the Medicaid program today.  At a minimum, it seems that tighter definitions of the patients covered and the providers eligible for the program are needed.