Reforming Medicaid’s drug discount program would be a real congressional achievement

The Senate HELP Committee hearing last week examining the 340B drug discount program, another example of a well-intentioned government scheme gone awry, shows that Washington is finally getting serious about passing much-needed modernization and reform.

Congress created 340B more than two decades ago to help low income and vulnerable patients afford prescription drugs. It was a worthy goal then and remains so today. Increasingly the program has been hijacked by big hospitals serving large numbers of well-insured patients. Clever hospital consultants and chain drug stores banded together to make money from this program — and now it’s a cash cow that pads hospital bottom lines.

{mosads}However, the recent introduction of The HELP Act, by Sen. Bill Cassidy (R-La.) and the bipartisan introduction of the 340B PAUSE Act, by Rep. Larry Bucshon (R-Ind.) and Rep. Scott Peters (D-Calif.), demonstrate a shift in momentum towards stricter reporting requirements on how 340B profits are utilized so Congress can make sure patients are being helped.

The 340B program is a perfect example of abuse that occurs because of the lack of oversight and accountability.

The 340B program allows clinics and hospitals that serve large numbers of low-income patients buy drugs at steep discounts, hoping these savings will be passed on to patients. That expectation is being fulfilled by most community health centers but less so by hospitals.

Despite being a program designed to help the poor, large numbers of insured patients are being run through the 340B program without their knowledge. 340B hospitals, via contract pharmacy arrangements with chain drugs stores, are selling their 340B discounted drugs at full price to these insured consumers and pocketing the extra profit.

This “opportunity” to buy low and sell high has led many hospitals to gobble up community oncology practices. Running expensive chemotherapy drugs through the 340B money mill compounds big profits. Community oncology clinics that can’t compete against the hospitals’ 340B profit advantage are bought out or shut down. The resulting concentration of chemotherapy treatment in urban and suburban centers makes it harder for folks in places like rural Michigan, my home state of Tennessee and many others find nearby treatment.

It’s worth noting that during the HELP Committee hearing 340B Hospital representative Dr. Bruce Siegel could not even agree that legislation should require discounts be passed along to uninsured patients, nor did he even know how much the program was helping patients pay for their drugs.

This testimony is especially ironic when you consider that every time HHS or Congress suggest any reform, the well-paid cottage industry of lawyers, IT experts and investors who make millions exploiting loopholes in the 340B program, rise up indignantly to say that any reform will hurt the poor.

Groups such as the Community Oncology Alliance have documented how uninsured breast cancer patients and others are sometimes turned away from hospitals that make millions from 340B.

A recent study by Avalere Health pointed out that spending on charity care in hospitals has dropped in recent years. That’s not surprising given that Medicaid rolls are rising, but what is surprising, and unacceptable, is that charity care spending in hospitals benefitting from the 340B program has declined more rapidly than in non-340B hospitals.

Of hospitals joining the 340B program in 2015, 69 percent have lower charity care spending than in the previous two years. In too many instances the more hospitals earn from 340B, the less generous they are in helping the poor.

The HELP Committee indicated early on that bipartisan support for reform may be possible. Lawmakers pushed for changes to the program, including requiring data from hospitals on how 340B profits are used — transparency that will also help state officials hold hospitals more accountable.

Reforming 340B is not only possible, but a good opportunity to work in bipartisan fashion toward providing patients and taxpayers with clear information about how dollars are being spent and ensure that public resources are properly used for the most vulnerable. A rare bipartisan win.

Lindsay Killen is a healthcare analyst and vice president for strategic outreach and communications at the Mackinac Center for Public Policy, a nonprofit group based in Midland, Michigan.