My View: Hospitals abuse drug program meant to help poor - Opinion - Rockford Register Star - Rockford, IL

 

By David Miller
Posted Dec. 12, 2014 @ 5:00 pm

An obscure federal program designed to help poor Americans afford prescription drugs is being used to boost the profits of the nation’s largest hospitals and pharmacies.

Many of Illinois’ 188 hospitals are taking part in this abuse. And Washington is finally taking notice, pledging to refocus the 340B program so that it serves those it was intended to help.

When Congress created 340B in 1992, lawmakers hoped that by requiring pharmaceutical firms to discount drugs sold to hospitals serving large numbers of poor and uninsured, they’d help those hospitals without tapping taxpayers.

But the law has morphed considerably over the past 22 years. And today, hospitals aren’t required to pass 340B discounts along to patients. Consequently, hospitals participating in the program receive discounted drugs for all their patients — even the ones that are insured or can afford the cost of care.

Here’s an illustration of how this scheme works. Say a drug normally costs $100, but a hospital can purchase it for $60 directly from the drug manufacturer as part of the 340B program. When the hospital treats an insured patient, it bills the insurer the full $100 price for the drug. In addition, the hospital typically collects a co-pay from the patient, say $10.

The end result is that the hospital makes a $50 profit on a drug that cost the hospital only $60. That’s an 83 percent return that has nothing to do with helping the poor and uninsured.

This hypothetical example may actually understate how much money hospitals are making off 340B. Last year, the North Carolina News & Observer reported “large hospitals (with access to 340B discounts) are dramatically inflating prices on chemotherapy drugs at a time when they are cornering more of the market on cancer care. ... Hospitals routinely mark up prices on cancer drugs two to 10 times or more over cost. In some cases, the markup is far higher.”

With this kind of money to be made, it’s no wonder why almost every hospital in the country is vying to be part of the program. In order to be deemed eligible, hospitals have only to meet certain benchmarks for the number of medically underserved patients they treat. But there’s scant evidence that the method used for determining eligibility corresponds with serving high numbers of the poor and uninsured. In fact, the federal Medicare Payment Advisory Commission itself has expressed skepticism of the methodology.

As a result, 1 in 3 U.S. hospitals now participates in the 340B program. The Berkeley Research Group estimates that expenditures under the program will double from $6 billion in 2010 to $12 billion in 2016.

This is not only fiscally irresponsible and unsustainable, it’s wrong. The 340B program is supposed to help poor patients, not hospitals’ profit margins. Federal lawmakers must get 340B back on track.

 

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