Despite making great strides in healthcare innovation and technology, the American healthcare system has been overburdened by COVID-19. The last thing we need is for the most vulnerable Ohioans to be left hanging out to dry by greedy interests in our healthcare system.
Hospital corporations in Ohio have been taking advantage of a promising government program: the 340B Drug Pricing Program. 340B was founded with the best of intentions, to help uninsured and low-income patients get the care they need at the same time supporting hospitals that were providing charity care. It requires drug manufacturers to provide outpatient drugs to qualifying 340B hospitals at drastically discounted prices.
Over the last several years, many of these 340B hospitals have found loopholes in the program that allow them to swindle patients by not passing these discounts on to patients. As a result, many hospitals are making huge profits off the program and giving away very little charity care.
A recent national study of 340B hospitals by the Pacific Research Institute found that not only do “non-profit” 340B hospitals make 37% more in profits compared to the average of all hospitals, but these 340B hospitals that are supposed to provide charity care give 22% less of their net patient revenue to charity care than all hospitals.
This ridiculous situation has been caused by two dynamics, the broadened definition of qualifying 340B hospitals under the Affordable Care Act and the abuse of “contract pharmacies.” Originally there were 90 participating 340B hospitals; now there are over 2,500. Yet only 38% of 340B hospitals and 29% of hospital outpatient clinics are in medically underserved areas.
At the onset of the program, hospitals were limited to having one contract pharmacy but are now allowed to contract with an unlimited number of pharmacies, soaring from 1,300 to nearly 30,000. Of this huge number, only 26% of contract pharmacies are in MUAs. The unfortunate reality is that in the current environment the 340B program incentivizes hospitals to figure out how to prescribe more drugs through their huge network of contract pharmacies. Under the program, they get an approximately 50% discount on prescriptions, don’t pass the discount on to patients and sell them for full marked up price.
In addition to the contract pharmacy situation, hospitals have been purchasing independent oncology practices, which makes them 340B eligible outpatient departments. In 2014 and 2015, 74.5% of acquisitions of community oncology clinics were by 340B hospitals. When cancer care shifts from community oncology practices to hospital-affiliated settings, 340B hospitals take advantage of the number of expensive cancer drugs that can be bought at significant discounts and then sold through contract pharmacies at marked-up prices.
Patients suffer from the abuse of 340B. This is true especially for cancer patients. Patients who received chemotherapy in the hospital outpatient setting incurred a significantly higher cost than patients whose chemotherapy was delivered in a physician office. In 2014, the cost of chemotherapy was 34% higher for Medicare patients and 42% higher for commercially insured patients. For prescription drug costs, many uninsured and low-income patients are not offered discounts and sometimes end up paying 3 times the purchase price. An analysis of the program found that 57% of hospitals surveyed did not provide discounted drug prices to low-income, uninsured patients getting their medications at the hospital’s contract pharmacy.
Ohioans are particularly affected by the abuse of 340B. As PRI found, Ohio’s hospitals are making tens of millions of dollars in revenue and profit thanks to their low spending on charity care and massive networks of pharmacy contracts.
For example, two Ohio hospitals were looked at closely in the study; neither of which were in Lima. One of the hospitals has 168 pharmacy arrangements, and the other has 141 arrangements. Both hospitals gave away meager amounts of their net patient revenue towards charity care: 0.66% and 1.36%, respectively.
Since mid-2020, many drug manufacturers have said that the lack of consistent regulation and baseless expansion of the 340B program have gone too far and have restricted drug discounts to 340B hospitals’ contract pharmacies. In the last couple months, hospitals, drug manufacturers and the government have forced the courts to decide on this issue, but the courts have said they need help from Congress because 340B guidelines are too ambiguous.
The massive expansion of the program along with hospitals taking advantage of the loopholes creates an urgent need to reform 340B through Congressional action, so vulnerable patients can access the care that they desperately need. Over the years bipartisan congressional leaders have raised concerns surrounding the program’s requirements and how the lack of oversight impacts the integrity of the program.
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