Christina Smith

The 340B program is a prime example of public policy gone wrong. The original intent of the program was good, but based on current results, the program is flawed and is in desperate need of reform.

Created in 1992 to allow hospitals to buy discounted drugs from manufacturers with the intent of passing on the savings to low-income patients, the program has expanded at an alarming rate and is being used to puff up the profits of hospitals and providers.

The latest horror story about the abuses, failures and greed involved in the 340B program appeared in a September 24 New York Times article, “How a Hospital Chain Used a Poor Neighborhood to Turn Huge Profits.” The article analyzed how Richmond (Va.) Community Hospital, owned by Bon Secours, was supposed to reinvest profits from 340B “into their facilities, improving care for poor patients. But Bon Secours, founded by Roman Catholic nuns more than a century ago, has been slashing services at Richmond Community while investing in the city’s wealthier, White neighborhoods, according to more than 20 former executives, doctors and nurses.”

“Bon Secours was basically laundering money through this poor hospital to its wealthy outposts,” Dr. Lucas English told The Times. He worked in the Community Hospital’s emergency department until 2018. He said, “It was all about profits.”

The Times reported, “More than half of all hospitals in the United States are set up as nonprofits, a designation that allows them to make money but avoid paying taxes. Although Bon Secours has taken a financial hit during the pandemic like many other hospital systems, the chain made nearly $1 billion in profit last year at its 50 hospitals in the United States and Ireland and was sitting on more than $9 billion in cash reserves.”

The 340B discount is usually 20 percent to 50 percent. The drugs are sold to “covered entities,” which include federally qualified health centers; Ryan White HIV/AIDS grantees; children’s, disproportionate share, free-standing cancer, and sole community hospitals; and specialized clinics. The covered entity, or its contract pharmacy, is supposed to pass the savings from the discounted drugs to their low-income patients, but that has not occurred due to vague language in the state and regulations along with other factors. The abuse of the program accelerated beginning in 2014, after the Patient Protection and Affordable Care Act expanded the type and number of entities that could benefit from the program.

The Health Resources and Services Administration, which oversees 340B, reported that the program’s covered entities bought $43.9 billion in covered outpatient drugs under the program in 2021, a 16 percent increase over 2020. The blog Drug Channels reported in June 2020 that drug purchases reached $29.9 billion in 2019, an increase of 23 percent from 2018 and more than 232 percent since 2014.

A January 2018 House Energy and Commerce Committee report on 340B documented insufficient oversight, reliable data and reporting requirements. The program’s failures were the result of several factors, “including Congress’s failure to clearly identify the intent of the program, especially the definition of a 340B patient, and require covered entities … to report program savings and how they are used.”

The committee’s reform recommendations included giving HRSA more regulatory authority and resources to oversee and administer the program, clarification by Congress of the intent of the program, and providing more transparency on how covered entities provide charity care.

A November 2021 study released by Xcenda, “340B and Health Equity: A Missed Opportunity in Medically Underserved Areas,” found, “Today, there are nearly 30,000 unique 340B contract pharmacy locations compared to just 1,300 in 2010; that was the year when HRSA updated its guidance to allow hospitals and other covered entities to have an unlimited number of contract pharmacies, instead of limiting the program to covered entities with no on-site pharmacy.”

The Xcenda report found that since 2004, newly registered 340B disproportionate share hospitals tend to be in higher-income communities compared to hospitals that previously joined the 340B program. More than enough congressional, media and outside organization analyses and reports have blown the lid off the corruption, cost, failure and abuse of the 340B program. The groundwork for reform has been laid.

All that remains is the will to get the job done, which will both save the taxpayers money and give low-income patients the discounts on drugs that they have long deserved. Eliminating the horrors exposed about this program should be a top priority for the 118th Congress.

Christina Smith is Health and Science director at Citizens Against Government Waste. She wrote this for InsideSources.com.

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