A little over a year ago, I warned about the growing abuse of the 340B Discount Drug Program, noting that chain drug stores like
The 340B Drug program was originally passed in the early 1990s as part of a Veteran's bill. The law required drug manufacturers wishing to participate in Medicaid provide discounted drugs to health care facilities and other covered entities. In 2009, Talyst, a consultant to hospitals and contract pharmacies began lobbying for a rapid expansion of the program recognizing, in the words of Talyst, "There is no requirement to pass the savings on to patients directly." Companies soon discovered it was legal, under certain parameters, to take in drugs at a discounted rate and charge insurers for the full cost of the drugs without passing the discounts on to patients.
Companies like Talyst got their wish when ObamaCare expanded the program and hospitals and facilities began to take advantage of the program. Duke University Hospital turned a profit of $69.7 million on 340B drugs that they sold to patients. According to the Charlotte Observer, “Duke University Hospital purchased $65.8 million in drugs in 2012 through the 340B discount program, which saved $48.3 million. It sold the drugs to patients for $135.5 million, earning them a profit of $69.7 million.
Hospitals argue that they use the profits for charity care, but an analysis conducted by Avalere Health found roughly two-thirds of hospitals participating in 340B programs provide less charity care than the average U.S. hospital, with charity care making up 1% or less of total costs at a quarter of those facilities.
Seeing the potential for profits, the program is growing by leaps and bounds. An analysis conducted by the Berkeley Research Group found that drug purchases made at the 340B price rose from $1.1 billion in 1997 to more than $7 billion by 2013, with projections of reaching more than $16 billion by 2020. The sad reality is in most cases the poor never see the discounts.
There has been some oversight from some members of Congress, especially Sen. Charles Grassley (R-Iowa) who has pestered the Obama administration for an explanation. Now the House of Representatives has gotten into the act.
Rep. Joe Pitts (R-PA), the Chairman of the Health Subcommittee of the House Energy and Commerce Committee, recently called the first of what hopes to be many hearings on the abuse inherent in the system. Most members of Congress who participated in the hearing acknowledged a role for the program but raised critical concerns about abuse and the lack of oversight by the Centers for Medicare Services (CMS).
“To preserve the 340B program and ensure that it is serving those who most need help, greater oversight and transparency is needed to increase the program's accountability,” said Rep. Pitts (R-Pa.), who chaired the proceedings.
The Inspector General of the Department of Health and Human Services testified that there is abuse in the system and Congress needed to take steps to end it. "More transparency is needed in both 340B ceiling prices and Medicaid claims for 340B-purchased drugs. OIG’s work on the 340B program has consistently found that a lack of transparency in both 340B ceiling prices and Medicaid claims for 340B-purchased drugs has negatively affected 340B providers, State Medicaid programs, and drug manufacturers. The lack of transparency in prices prevents 340B providers and Medicaid from ensuring that they have paid the correct amount for 340B-purchased drugs,” said Ann Maxwell, Assistant Inspector General for Evaluation and Inspections at Office of Inspector General.
The groundwork has been laid for reform. The question remains when and in what form will the reform look like. The good news for consumers and taxpayers is Congress might actually take a responsible step to ensure that this corporate gravy train comes to a stop while ensuring the benefits reach the people who need them.
