340B Drug Discount Program is a Nightmare

No need for spooky ghost stories and haunted houses this Halloween when patients are living in a nightmare caused by the heavily exploited 340B drug discount program. Special interest sharks are eating up the profits from the sale of drugs at the expense patients, who are not getting the discounts they deserve, as well as the taxpayers

Congress created 340B in 1992 to fix a problem it had created two years earlier when an overreaching government implemented price controls in the Medicaid drug benefit program. As a condition to participate in Medicaid, pharmaceutical companies are required to participate in the 340B program and give discounts of between 20-50 percent to certain federally funded healthcare facilities and disproportionate share hospitals (DSH) known as "covered entities" that serve large numbers of low-income and uninsured patients. The savings from the program is intended to go to patients that qualify. But the lack of a clear definition of patient among other shortcomings has allowed the program continues to grow exponentially and be subject to substantial abuse.

In 2014, 340B discounted purchases were $9 billion, but by 2020, they reached $38 billion, or 322 percent more than in 2014, and a 27 percent increase from the $29.9 billion spent in 2019. The healthcare data analytics firm IQVIA released its latest annual study, "The 340B Drug Discount Program Exceeds $100B in 2022," which provides further evidence exposing the exploitation of the program. The report found that the misuse of the funds by hospitals and contract pharmacies is ongoing, and patients are still not getting the benefits Congress intended them to receive.

Like many other well-intended programs 340B has ended up both wasting money and failing to provide the benefits that were supposed to go to the patients. A New York Times article analyzed how 340B was being abused at Richmond (Virginia) Community Hospital, owned by Bon Secours. Rather than reinvesting profits from 340B drug sales into its facilities and improving patient care, the money was being diverted to Bon Secours' facilities in Richmond's wealthier neighborhoods. Dr. Lucas English, who worked in the hospital's emergency department until 2018, said, "Bon Secours was basically laundering money through this poor hospital to its wealthy outposts … It was all about profits." Dr. Peter B. Bach, who has written about the use of 340B profits to open more clinics in wealthier areas, said the hospitals are "nakedly capitalizing on programs that are intended to help poor people."

At a September 23, 2024, Capitol Hill briefing, hosted by the Council for Citizens Against Government Waste (CCAGW), the group's president Tom Schatz discussed the legislative history and abuses of the 340B program, reports from both government and private sector sources on its costs and failures, the lack of action by Congress to adopt needed reforms, and CCAGW's work on 340B. Pioneer Institute Senior Fellow & Director of Pioneer Life Sciences Initiative Dr. William Smith discussed the Pioneer Institute's analysis of 340B abuses, including their state-by state mapping tool and the lack of charity care at many hospitals. He described the "arbitrage" of charging higher prices for insured patients and pocketing the difference rather than passing on the savings to them, as well as how the program had grown to $124 billion in 2023. Patients Rising Chief Mission Officer Terry Wilcox talked about the impact on uninsured patients who are sometimes caught between jobs and find themselves with short-term insurance coverage and no access to 340B benefits and suggested that there should be greater transparency for patients about being treated at 340B hospitals. The panel was moderated by Monica Popp, founding partner of Marshall and Popp. All panelists agreed that a clear definition of a 340B patient and more transparency is essential to reform.

Congress must act to prioritize patients before it's too late. The 340B drug discount program is failing those it is intended for, and reforms are essential before it is frighteningly exploited any further. The program needs further accountability and transparency meaning covered entities verifying patient eligibility.

• 340B drug discount program
• Healthcare
• Price Controls