Crony Capitalism Targeting The 340B Program

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If the rise of Donald Trump and, to a lesser extent, Bernie Sanders has proven anything, it’s that America is fed up with business as usual in Washington. But has Washington gotten the message?

The debate over a program that helps low-income patients gain access to certain drugs and clinical services may provide some insight.

The 340B program is a case study in what happens when a powerful lobby doesn’t like having to participate in a government program but knows it can’t kill the program. There’s a limited-government argument to be made that such a program should not exist. But since it does, we have an interest in seeing that it accomplishes what it was designed to do.

The 340B program, named for its section in the Public Health Service Act, basically requires pharmaceutical companies that want to sell to the government to provide rebates on some drugs to hospitals that serve low-income patients, as well as the clinics and outpatient facilities that serve those hospitals.

The program accounts for about 2 percent of all medicines purchased in the United States and covered purchases amount to about $4.5 billion per year in savings for hospitals, which they use mostly to cover costs of patients unable to pay. It serves about a third of the nation’s hospitals, including cancer hospitals, children’s hospitals, rural hospitals and those that serve disproportionately low-income patients.

Not surprisingly, the pharmaceutical industry does not like the program. It particularly resents that if hospitals dispense these drugs to patients with insurance, it can sell them at market prices and use the difference to address those other expenses associated with treating patients who often can’t pay. That’s actually how Congress intended the program to be used. And again, those savings do not come from taxpayers; they come from the pharmaceutical companies in the form of discounts.

Drug companies are well aware of the widespread shift of healthcare to the outpatient setting. That’s where many of their blockbuster cancer drugs are now administered, so Big Pharma is going all out to derail 340B and recoup lost profits. A central line of attack has been to push the Health Resources and Services Administration, which administers the program, to adopt rules that limit eligibility. Last year, the agency released proposed guidance that would shrink 340B radically if approved.

The proposed rules caused so much commotion among users of the program the agency put the recommendations on the backburner. But the drug industry has spent too much capital to just let them sit indefinitely.

So, in short, since pharmaceutical companies can’t exactly argue against the program itself, they have chosen a different strategy – they push for rules that discourage hospitals from taking advantage of it.

For instance, 340B commonly is used for prescriptions written at the end of an impatient stay to ensure patients have access to the drugs they need with no gaps. One of the HRSA proposals would end this practice because, according to the pharmaceutical companies, this enables pharmacists to make profits not envisioned by the program’s designers.

Actually, it fits the vision quite well. There’s a 772-bed hospital in Philadelphia that serves low-income patients almost exclusively. When patients are discharged, the hospital ensures they have a face-to-face meeting with a pharmacist and follow-up thereafter. The program has led to a 50 percent reduction in the likelihood of re-admittance.

Moreover, 81 percent of hospitals in a recent survey said they would lose discounts under this proposal; 57 percent would struggle with it, 24 percent would find the changes “not feasible” and 11 percent say they would stop participating in 340B if it were enacted.

Another of the proposals would require patients who receive infusions as part of their care – typically cancer patients – to receive those only at the hospital where they were diagnosed. So, for instance, patients in Texas might go to the world-renowned cancer hospitals in Houston for diagnosis but receive their treatments far closer to home.

This would outlaw that quite reasonable practice and, again, force hospitals to make tough choices. The survey of hospitals found 85 percent would lose discounts over this rule, 26 percent would find the changes unfeasible (and more than half would struggle to make them) and 21 percent would drop 340B altogether.

Another would require that prescriptions filled with 340B drugs be written only by hospital employees or independent contractors for whom the hospital would bill. This ignores the reality of how hospitals operate today and would render the program operationally useless to many hospitals.

If all the changes, taken together, were enacted, nearly 30 percent of participating hospitals say they would drop the program. That appears to be the precise intent of the pharmaceutical industry in proposing these changes.

Like any government program, 340B probably could be improved and made more efficient. But when changes are proposed to a program and three-fourths of the hospitals who use the program say those changes would hurt, then we’re probably dealing with some industry overreach.

And when that overreach could cost lives as well as money, it becomes incumbent on all of us to stand up and say no.