Control of Congress is once again split between Democrats and Republicans. That means the top legislative goals of each party’s very different policy agendas will likely remain on the back burner. But there’s still a narrow lane for bipartisan cooperation on shared priorities.
Take, for instance, the much-needed reform of a federal program meant to help underserved patients get the medicines they need. That program, known as 340B, is not working as intended. Instead, hospital chains abuse it at the expense of the people it is supposed to help.
The idea behind 340B is simple. The program requires pharmaceutical companies to offer steep discounts on outpatient drugs for hospitals serving low-income clientele. The average discount is 59 percent but can be much higher. Some medicines cost just a penny.
Notably, 340B lets providers bill insurers the total price for the discounted drugs. For example, an eligible hospital could purchase a drug for $200, then request a reimbursement from the insurer of its full $500 list price. Most of the $300 difference would be the hospital’s to keep.
Eligible hospitals spent at least $38 billion on discounted drugs last year. Assuming an average discount of 59 percent off the list price, hospitals’ total 340B profits could easily be in the tens of billions.
When lawmakers created 340B in 1992, they assumed hospitals would use these profits to help needy patients get the drugs they might otherwise be unable to afford. Hospitals could then reinvest program profits in the facilities those patients rely on for care.
Unfortunately, lawmakers did not write legislation strong enough to enforce their good intentions. In fact, 340B entities aren’t required to pass along the windfalls they reap to underserved patients, and there’s little accountability built into the program.
One study found that 340B hospitals charge cash-paying or uninsured patients 3.8 times their discounted purchase price — almost the same as the privately insured. For one cancer drug, 340B hospitals charged 11.3 times their purchase price, according to the same report.
This is happening even at some of the country’s most prestigious hospitals. A recent Wall Street Journal analysis found that Cleveland Clinic’s 340B-eligible hospital, for example, is among those that fail to pass along discounts to patients who are having trouble paying for prescriptions.
At the same time, many 340B-eligible facilities are scaling down the care available to poor patients even as they expand offerings in wealthy neighborhoods where they can also sell drugs purchased through their 340B eligibility.
Consider Richmond Community, a 340B hospital in Virginia owned by hospital giant Bon Secours. A recent New York Times investigation showed how Bon Secours uses Richmond Community’s 340B status to purchase drugs at a discounted rate, only to administer them to wealthy patients at country-club-like hospitals miles away.
In recent years, Bon Secours closed Richmond Community’s intensive-care unit and maternity ward. One patient needing a ventilator died after waiting hours to be transported from Richmond Community to a hospital with a working ICU.
This injustice is made possible by bizarre financing arrangements. Hospital chains like Bon Secours are registering rich hospitals as “subsidiaries” of the neglected clinics they are running in poorer neighborhoods. It’s akin to Four Seasons resorts in Los Angeles and New York participating in an ownership structure that makes them subsidiaries of a $29/night Motel 6 in rural Mississippi.
None of these dubious but legal antics would be possible if Congress wrote a clearer law to begin with. By now, though. Republicans and Democrats, though operating from different premises, agree on the need to redesign the program.
340B reform would help Democratic lawmakers make good on their campaign promises to do more for the 30 million Americans without health insurance. It’s also a chance to crack down on big businesses raking in gigantic profits at the expense of consumers.
Republicans, for their part, can also support changes to 340B without abandoning conservative principles. The law, as currently written, incentivizes hospitals to consolidate into large regional giants, reducing competition that puts a check on prices.
Reform can start by clarifying the program’s intent: 340B is about helping underserved patients. Congress can then require hospitals to disclose where precisely the tens of billions of dollars in 340B profits are going.
The 340B program is a classic example of the bad execution of good intentions. For the sake of patients in need, Congress must fix it.
