The 340B Program’s Effects on Hospitals.

By February 23, 2018Commentary

The 340B program was intended to help provide low-cost drugs for hospitals to use with low-income patients, who often did not have insurance.  The belief was that hospitals often might not be reimbursed for these drugs.  In reality, the program has become yet another boondoggle for hospitals, allowing them to pay low prices for drugs while charging insurers full-price, raising costs for patients and payers.  Congress and HHS are supposedly working on a fix, but maybe the best thing is just to dump the program altogether.  Hospitals are doing just fine, using market power to extort profits from commercial payers in particular.  An article in the New England Journal of Medicine reviews some of the untoward consequences of the program.   (NEJM Article)   Over 40% of hospitals currently participate in the program, getting discounts from 20% to 50%.  One particularly egregious abuse is hospital acquisition of physician practices which use a lot of injectable or infusible drugs to increase profits on those.  And please note that by definition under the program, these are all non-profit hospitals engaging in this looting behavior.

Looking at hospitals with over 50 beds, and at hematology/oncology, ophthalmology or rheumatology, the authors sought to ascertain if hospitals had increased the number of employed physicians to increase 340B drug use and profits.  And of course, hospitals that were eligible for and participated in the 340B program did in fact acquire and employ significantly more hematologists/oncologists and opthamologists than other hospitals, but there was less of an effect for rheumatologists.  More drug claims were filed as well, consistent with the profit-seeking incentives created by misuse of the program.  And they treated more Medicare patients who had supplemental insurance that would cover the 20% copay on Part B administered drugs and they served fewer Medicaid patients, who are the poor patients the program was actually intended to benefit.  Can you say scumbags?  And of course, the authors find no evidence that the excess profits were used in any way to benefit poorer patients.  Definitely time to get rid of the program altogether, you just can’t trust “non-profit” hospitals to do the right thing.

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