It is astounding how many government interventions in health care produce really bad unintended consequences, generally because the designers fail to recognize pretty obvious incentives that are being created to game the intervention. The 340B drug program is a good example and a recent Congressional Budget Office report reveals how out-of-control this program has become. The program was originally designed to help low-income patients get drugs at a reasonable cost. The law requires pharmaceutical manufacturers to sell drugs to certain clinics and hospitals at a reduced price. The 340B “pharmacies” are supposed to only serve low-income patients, generally without insurance. The clinics and hospitals of course have managed to expand that to include all kinds of insured patients and they buy the drugs at a low price and then mark them up, making large profits. This is vile, but the legality has been in dispute and the practices go on until Congress does something to fix this.
At this point over $50 billion a year flows through the 340B programs, in which there are an astounding 50,000 participating providers. Most of the money goes to hospitals and their outpatient departments. The largest single therapeutic category is cancer medications. CBO suggests that the program has actually incentivized the use of more drugs and higher priced drugs, again largely due to hospital systems figuring out how to use the program to make money. The program was never intended to cover non-low-income patients but didn’t clearly exclude them. It needs too, or the hospital systems need to be banned from marking up the price they pay for the drugs. Just one more contributor to the rising cost of health care and health insurance in the US. (CBO Report)
I, respectfully, disagree. I was the director of pharmacy for 15 years at a DSH ( at least 70 % Medicare and Medicaid and no pay ) hospital. If we had not been eligible for 340 b pricing, we could not have provided cancer services. Yes, we got 340 b pricing which is right above the VA pricing. With the difference between our mark up and the 340 b price, we were able to keep our cancer outpatient clinic open which meant that patients who had no insurance were still able to get services near home . It is an outpatient discount drug program which helped organizations keep the doors open. Most patients had their costs forgiven by the hospital so they were not adversely affected by the mark up. Did patients who could afford the drugs get these drugs? Of course… they too came to the outpatient clinic. But lucky them that a clinic was there for them to use…. The CBO is playing into the drug companies hands.
thank you for reading and for the very informed comment. I think this illustrates the crux of the issue. The 340B program was not intended for hospitals or clinics or anyone to make money and to support other programs. It was intended solely to ensure that low-income patients were able to get prescriptions filled at a low cost, with little or no copay. The idea that someone would mark up the prices never occurred to those who designed the program. And it does raise overall costs because those often extremely large markups are passed on to commercial and other payers, raising insurance prices for everyone, and causing higher out-of-pocket expense for non-indigent patients.
I don’t accept the notion that programs like the cancer clinic you mention wouldn’t exist without the drug markups, which for cancer are truly alarming. Cancer as a diagnosis is very well paid by Medicare, Medicaid and commercial health plans. I strongly suspect that a real look at the costs of the clinic and the revenue it generates would indicate that it was self-supporting without marking up drugs. Research into a number of 340B facilities shows exactly this and finds that the markups are basically pure profit, usually for non-profit entities.
The drug companies have plenty of fault for the overall price of medications, but what they object to here is that they get blamed for the marked-up prices, when they are in fact selling these drugs to the clinics at the lowest price they sell it to anyone. I have no sympathy for the drug companies or for the hospitals and clinics who are doing just fine and tend to pay their administrators extremely high salaries, which are not justified in non-profit institutions. In this case, the right thing to do is return the program to its intention–the pricing can be used only for indigent patients and there can be no markup, or even better, the 340B programs can use the drugs for anyone but can’t mark up the price.