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Opinion: Hospitals Profiting from Federal Drug Program Intended to Help Needy Patients

OpinionOpinion: Hospitals Profiting from Federal Drug Program Intended to Help Needy Patients

MedicationsAn assortment of medications. Photo via Pixabay

The COVID-19 pandemic has exposed an ongoing lack of equity in our healthcare system. Patients and advocates have called for reforms that will help underserved Americans obtain access to the quality, affordable care they deserve.

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One of the many places on which we must focus reform efforts is a federal program that, while intended to assist in medication access for our most underserved communities, is instead being exploited for huge profits by many hospital systems and some contract pharmacies.

The program in question, known as the 340B Drug Pricing Program, was created in 1992 to improve affordable access to prescription medications for low-income and underserved patients. Under the 340B program, pharmaceutical manufacturers are required to sell medications to eligible entities such as “safety net” hospitals and community clinics at a greatly discounted price.

Those entities (called “covered entities”) are then required to use the money saved to expand “charity care” in a number of ways, including providing patients with access to diverse services in their communities. Unfortunately, due to lack of diligent program oversight, large for-profit hospital systems have been allowed to take advantage of the program to increase their profits, while access to affordable medications for our most vulnerable patients has not improved.

It is well past time to reform 340B so that at-risk populations with low income, poor access to health services, and difficulty navigating our complex healthcare system can receive the help they need with costly medications. 

Problems with 340B stem from the massive expansion in the program, which was allowed beginning in 2010. Between 2010 and 2020 participation in the program increased a stunning 4228%. While this may sound like it could have been good news for low-income patients in the form of access to more covered entities, the data tells a different story.

Between 2011 and 2019, 340B contract pharmacies located in low income, primarily Black and Hispanic neighborhoods, declined by 5.6%. During the same period, 340B pharmacies in the highest income neighborhoods increased by 5%. This scenario runs completely contrary to the intent of the program. The question then is, why is this happening?

The sad reality is that hospitals and their contract pharmacies have learned how to game the 340B program for profit. They do this by buying medications in bulk at steep 340B discounts and then billing public and private insurers the full price of the medication.

Knowing this, pharmacy benefits managers then turn around and charge these pharmacies additional fees to process prescriptions, which thus has those benefits managers making additional unearned money. Moreover, while many of the original contract pharmacies were independently owned and serving their respective communities, most contract pharmacies are now large chains operating in suburban and various other neighborhoods.

What the 340B program really needs to ensure it works as intended is true oversight. In 2019 the U.S. Government Accountability Office found that the agency tasked with overseeing 340B, the Health Resources and Services Administration, did not, in many cases, assess whether participating hospitals were even using the program discounts to improve care for vulnerable patient populations as required.

The steep decline in 340B pharmacy access within low-income communities of color and the massive increase in profits of covered entities participating in the program demonstrate the significant need for HRSA to step up its oversight. They must crack down on those exploiting the program, otherwise our our most vulnerable and underserved patients will continue to struggle.

The 340B Drug Pricing Program was created to serve a specific and critical need, not be another income source for large hospital chains, national pharmacy chains, and other for-profit entities. By reforming the program with thoughtful policies that ensure it is helping socioeconomically disadvantaged patients, we can address affordability and access concerns in meaningful ways.

Shane Desselle is associate dean for research and professional affairs at the Touro University California College of Pharmacy in Vallejo.

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