As health care continues to be a focal point of the current national discussion, it is important to remember the real bottom line: the patient. Political rhetoric aside, both sides of the aisle can agree that patients deserve the best possible care our nation can provide.
However, lack of oversight and program integrity can lead to unintended consequences and abuse of government programs. This is certainly true as it relates to uninsured, indigent patients accessing high quality health care.
Hospitals have been found to be abusing the 340B Drug Discount Program—often referred to simply as 340B—which was designed to help these patients access medicines at a discounted price. As I wrote in May, the 340B program was originally designed to target discount pharmaceuticals to uninsured, underinsured, and indigent populations.
Despite this mission, a report released around the time of that article indicated that the good intentions of this initiative were being steadily compromised by hospitals that provide little to no charity care and are simply using the discounts they receive on medications as a source of revenue instead of passing those savings along to vulnerable patients. That report showed that roughly a quarter of 340B hospitals spend less than one percent of their total costs on charity care. This fact alone is enough to justify a thorough review of the program.
A new report has shown that there remain additional forms of abuse in the 340B program. This report shows that hospitals are increasingly finding a new partner in deriving revenue from the program. Chain, for-profit pharmacies are reaping financial rewards by failing to pass along the benefits received to low-income patients.
Prior to 2010, entities participating in the 340B program were allowed to contract with one outside pharmacy in an effort to ease access for patients. In 2010, however, the Health Resources and Services Administration (HRSA) issued updated guidance that removed any restrictions for covered entities to contract with pharmacies to provide patients with 340B medicine. The goal of this provision was to ensure underserved patients could easily access discount medications through their local pharmacy, rather than having to return to the hospital. The unfortunate reality however, is that the patients the program is designed to help often do not receive the discount on medications since they are not identified at the “point of sale.”
When a patient goes to the pharmacy to pick up a prescription, data in the study indicates that neither party is aware the transaction is covered by 340B. Therefore the patient pays the full price for the medications at the time of the transaction and leaves the pharmacy. Afterwards, the pharmacy and the hospital with which it contracts on 340B split the difference in costs, pocketing the “spread” between what the pharmacy paid for the discounted medications and what the customer paid at the point of sale. Essentially, the hospital and pharmacy sell discounted medications at full price and keep the difference, making a tidy profit on the back of the low-income patient.
There are currently 30,000 contract pharmacy arrangements, three times more than HRSA anticipated in 2010. To put that number in perspective, one in four pharmacies is now a 340B entity and most are large, for-profit pharmacy chains.
More disturbing is that this extensive expansion of enrolled entities isn’t translating to increased access for patients. Of the 1,050 contract pharmacies studied in the recent report, only 16 are located in low income neighborhoods with large populations of vulnerable patients. As the study states, “The information about where contract pharmacies are located, combined with indications from the OIG report that many 340B entities are not providing discounts to uninsured patients, adds to the evidence that the contract pharmacy program has, in practice, been structured by many covered entities to emphasize the generation of profits by buying drugs at a government-controlled price, and reselling them at a higher price rather than improving access for vulnerable patients facing barriers to obtaining medicines.”
This problem is particularly pronounced in California. For example, of the 33 contract pharmacies associated with the University of California Davis Medical Center, only one is located in a low-income neighborhood. Not a single one of the Santa Ana area contract pharmacies are located in low-income areas. Without proper eligibility requirements, the meteoric rise in participating entities has done nothing to further the original intent of a once-beneficial program.
340B is an important program and has enormous potential to help patients access necessary treatments. When implemented properly, it aligns with the thinking that health care is a right regardless of income and is a valuable tool in breaking down barriers to access.
Shifting the focus back to its original purpose would serve as an example of successful health policy that attends to the needs of those among us who need our help the most. Today, patients are falling victim to a system that places profits over helping them live healthy, productive lives.
In short, we can do better than this.