Op-Ed: 340B Drug Discount Program 25th Anniversary

Photo source: Louisiana House of Representatives

Photo source: Louisiana House of Representatives

While Congress remains deadlocked on health care reform, there is good news for some of Louisiana’s seniors who are in the Medicare program. Recently the Center for Medicare and Medicaid Service (CMS), a federal agency that sets Medicare policy made some important change to the 340B Drug Discount Program which will result in Seniors and the Medicare Trust Fund paying less for prescription drugs.


Most people have never heard of the 340B Drug Discount Program although it is celebrating its 25th anniversary this year. Designed to help low income and uninsured patients to afford their prescription medicines, the program allows certain clinics and hospitals that serve large populations of such patients to buy drugs at a steep discount. The intention was that these discounts would be passed along to the patients.


Like so many well-meaning government programs, over time the purpose of the program has been lost and some hospitals have taken advantage of it to pad their bottom lines rather than help patients pay for drugs. Because the legislation that created the program, and the rules promulgated to implement it, are vague, clever consultants have found loopholes to help some hospitals exploit the program.

For example, while clinics such as the Ryan White AIDs Clinics, must document how they use the savings from the discounts, large corporate hospital chains who make tens of millions from the program have no reporting requirement at all. In fact, many hospitals run fully insured patients through the program, not just those in need. They take drugs they bought at a steep discount and sell them to fully insured patients at full price and pocket the difference. In the case of some very expensive cancer drugs, this profit could amount to thousands of dollars from just one patient. This overcharging not only impacts the Medicare Trust Fund but also the out of pocket amount that Medicare patients must pay.


In its recent ruling CMS has rightly said that hospitals must charge Medicare, and the Medicare patient, a price that is much close to what the hospital actually paid for the drug under the 340B Drug Discount Program. No longer are excessive profits acceptable. 


But even this welcome change by CMS is very limited. It only applies to drugs administered by hospitals to Medicare patients in their outpatient facilities. Drugs prescribed to Medicare patients which are taken at home and which seniors purchase from for-profit chain drugs stores with contract arrangements with the hospital, can continue to yield massive profits for both hospital and pharmacy.


So, while there is limited good news for some on Medicare, there is no good news for younger patients. The reality for non-Medicare patients is that those who are in need have no guarantee of receiving the 340B discount and those who are fully insured continue to be run through the system and charged full price, generating windfall profits for hospitals.


Since CMS has less authority to deal with non-Medicare patients, Congress needs to step in and modernize and reform 340B. Until they do the massive and unsustainable expansion of the program which has taken place in recent years will continue. Expansion would be fine if it were driven by the needs of patients. But it is not. It is drive by the desire of corporate hospitals and the for-profit drugstore chains which whom they have partnered, to pad their bottom line.


The purpose of the 340B Drug Discount Program is as valid today as it was 25 years ago. Arguably it is more important because prescription drugs play an ever-increasing role in modern medical care. But if it is going to survive another 25 years it need to be fixed. CMS has taken a good first step to protect some Medicare patients. But other Medicare patients, patients served by other government programs and those patients who have private health insurance or health insurance provided by their employers are not protected. Congress needs to follow the lead of CMS and reform 340B for everyone. I can think of no better 25th birthday present to this worthy program than for Congress to take action to stop those who are abusing it.


State Representative Tanner Magee

Louisiana - District 53

Posted on November 20, 2017 and filed under Louisiana.