How ObamaCare Will Hurt Cancer Patients

Once ObamaCare is fully implemented, it will expand a hospital subsidy program that will make obtaining cancer treatments even more difficult than under the current healthcare delivery system.

In an editorial in the Wall Street Journal, Dr. Scott Gottlieb, a physician and resident fellow at the American Enterprise Institute (AEI), explains that ObamaCare will expand a program called 340B, which draws funds from drug makers and health insurers in order to subsidize certain hospitals. The expansion has been necessary to offset some of the cuts that ObamaCare imposes on hospitals. A glaring side effect of 340B, however, is that the cost of cancer treatment will increase while the quality of cancer care will decline.

Gottlieb states that, when 340B began in 1992, its purpose was to support hospitals that provided care to the uninsured and those who are indigent. Since then, however, the program has widely expanded so that it became a “government cash cow that hospitals of every description have learned to exploit.”

Under the program, qualifying hospitals are permitted to purchase drugs from drug companies at forced discounts of 25 to 50 percent. The hospitals can then bill government and private insurers for the full cost of the drugs and pocket the difference. This procedure greatly incentivizes hospitals to search for patients and prescribe significant amounts of drugs. With more expensive drugs, hospitals pocket more cash; hence, the more costly cancer drugs are particularly appealing.

Gottlieb explains that the initial 340B legislation had planned that only about 90 hospitals would be eligible to provide care for a “disproportionate share” of poor and uninsured patients. However, by 2011, 1,675 hospitals–about one-third of all hospitals in the nation–were 340B–qualified.

By way of example, Gottlieb reports that even well-heeled hospitals such as Duke University Health System bought $54.8 million in drugs from the discount program in 2011, and sold them to patients for $131.8 million, to earn a profit of $76.9 million. Yet, only one in 20 patients served by Duke’s 340B pharmacy is uninsured; the remainder are covered by Medicare, Medicaid, or commercial health insurers.

Putting aside the questions this arrangement raises about the possibility that cancer patients are encouraged to take a greater number–and costlier–drugs in order to profit hospitals, ObamaCare is incentivizing even wider 340B abuses. 

According to Gottlieb:

The new health-care law expands 340B to cover cancer centers, new categories of hospitals and rural health centers. Since one of the ways that hospitals qualify for 340B turns on how many Medicaid patients they serve, ObamaCare’s Medicaid expansion will also increase the number of 340B-eligible entities.

To goose the windfall, eligible hospitals are buying private oncology practices so they can book more of the expensive cancer drug purchases at the discount rates. More than 400 oncology practices have been acquired by hospitals since ObamaCare passed. Acquiring a single oncologist and moving the doctor’s drug prescriptions under a hospital’s 340B program can generate an additional profit of more than $1 million for a hospital. In the process, treatment of the doctor’s patients is moved from an office setting to a hospital outpatient department.

Between 2005 and 2011, the amount of chemotherapy infused in doctors’ offices fell from 87 to 67 percent, according to Medicare billing data analysis for community oncology groups. The share of Medicare payments for chemotherapy delivered in hospitals, as opposed to outpatient office settings, was 16.2 percent in 2005, but increased to 41 percent in 2011.

Gottlieb warns that, as this pattern continues, almost all cancer treatment will be delivered by hospitals, leading to less convenience and comfort for patients, and higher costs as well. He reports that the Community Oncology Alliance estimates that a patient treated in a hospital clinic incurs about $6,500 more in costs that one treated in a private medical office. In addition, patients who receive hospital-based chemotherapy also pay an additional $650 in co-pays and other out-of-pocket expenses. With the price for infusing the medications alone increasing by 55 percent, the cost hikes for cancer treatment will undoubtedly drive up the cost of health insurance.

According to Gottlieb, the Obama administration has used informal “subregulatory guidance” to further expand 340B. In March of 2010, for example, a new “guidance,” apparently decided by unelected individuals, “allows hospitals to contract with an unlimited number of neighborhood pharmacies” through which they can dispense drugs. However, there is no requirement that such “satellite” pharmacies are geographically connected to the hospital:

This has created an industry of middlemen who build vast networks of pharmacies, all to expand the number of 340B prescriptions that a hospital can capture. There are now more than 25,000 arrangements between such satellite pharmacies and 340B-qualified treatment sites, according to the Health Resources and Services Administration.

The definition of a “covered patient” for 340B purposes is so murky under other guidance that hospitals are able to buy and bill discounted drugs for patients when the hospital merely serves as a conduit and doesn’t give direct patient care.

As can be imagined, abuse of the program has proliferated. The Health Resources and Services Administration recently audited eligible 340B hospitals and discovered that almost half of those assessed showed “adverse findings” such as discounted drugs diverted or dispensed to ineligible patients. Similarly, the General Accountability Office finds that 340B funding is not being used for indigent patients. Instead, more of the money has become a source of general revenue for hospitals that qualify for the program.

Gottlieb states that drug manufacturers have responded to the profiteering practices:

To combat this sort of gaming, drug makers are tightening how they distribute cancer drugs, to make improper diversion more difficult. This drug-company strategy may stem some of the most rampant abuses, but it adds to the cost and complexity of the pharmaceutical supply chain. It’s another way that 340B increases costs.

The 340B program doesn’t print free money. The cost of the discounts are foisted onto patients and insurers, who are forced to pay higher prices that drug makers establish to offset the cost of the forced discounts.

Americans already know that, with ObamaCare, they will not be able to keep their doctor, or their health insurance plan, as promised by President Obama. Now, they also know that ObamaCare will not put an end to the abuse that drives up health care costs and causes health care quality to decline.