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As football season kicks off, hospitals keep scoring on 340B
https://phrma.org/blog/as-football-season-kicks-off-hospitals-keep-scoring-on-340b
ICYMI: Hospital consolidation is driving up health care costs
A new Washington Post investigation highlights a major driver of rising health care costs that too often escapes scrutiny: The same care can cost dramatically different amounts depending on where patients receive it, with hospital consolidation and growing market power helping drive those price differences.
The investigation found that hospitals with fewer competitors can command substantially higher prices from insurers and patients.
Consider this: The Washington Post compared the price of a knee replacement under the same Blue Cross Blue Shield health plan at two North Carolina hospitals. At one hospital, the procedure cost about $16,000, at another hospital—which has little local competition following a merger of the region’s two largest hospitals—it cost roughly $40,000. The pattern extends beyond one procedure or one market. The story points to similar price disparities across multiple states and services.
Why this matters: Those higher costs do not stop with the patient receiving the care, they ultimately flow through to employers, workers and families in the form of higher premiums and health care costs.
The big picture: Decades of hospital consolidation have left many communities with fewer choices and dominant health systems with greater leverage to demand higher prices from patients and insurers with no alternatives. Hospital prices have risen faster than prices in any other sector of the economy over the past quarter century, according to the Washington Post, making hospital costs an increasingly important part of the affordability conversation.
It’s not just consolidation: The 340B program’s lack of transparency and oversight has allowed large hospital systems to generate additional revenue with little accountability for how those dollars benefit patients. Hospitals eligible for 340B can purchase medicines at steep discounts, charge insurers and patients higher amounts and pocket the difference, without any requirement that patients benefit from the savings.
This drives up costs for patients, employers and taxpayers while creating another lucrative revenue stream for large hospital systems.
The bottom line: Policymakers looking to lower health care costs must address the role hospitals play in driving spending and premiums higher. Greater competition, transparency and accountability across the hospital sector, including in programs like 340B, are critical to making health care more affordable for patients, employers and taxpayers.
Learn more at PhRMA.org/340B.
Eliza Maciag
It's time to modernize 340B: The case for a rebate model
The Health Resources and Services Administration’s (HRSA) announcement of the revised 340B Rebate Model Pilot Program is an important step to bring greater transparency, accountability and integrity to a program that has grown in size and complexity.
The context: The 340B program has expanded far beyond its original purpose, growing into a massive revenue stream for big hospital systems with little evidence patients benefit. It’s now the second largest federal drug program yet operates with minimal transparency or accountability.
What to know about a rebate model:
- It improves transparency and accountability. Today, hospitals and clinics receive the 340B discount without first having to verify the prescription is eligible. A rebate model inserts transparency and accountability into the system up front, better aligning the 340B program with the way the rest of the health care system currently operates. Prescribe, verify, then rebate, so the discount is only paid after eligibility is confirmed.
- It cracks down on waste, fraud and abuse. Federal watchdogs have repeatedly flagged the program's lack of safeguards against claiming more than one discount on the same prescription, despite federal law not authorizing it. A rebate model provides transparency into claims-level data needed to help prevent unauthorized duplicate discounts.
- It provides rapid verification. A rebate model relies on data hospitals and clinics already routinely collect and submit for billing and reimbursement to provide rapid verification of claim eligibility. Other approaches are inherently retrospective and either would rely on voluntary compliance or require significant government resources for data verification and enforcement.
- It protects patients and taxpayers. Patients get their medicine exactly as they do today - nothing changes at the pharmacy counter. What does change is the 340B price is paid out to hospitals after eligibility is confirmed, closing a gap that has let costs climb for patients, taxpayers and employers alike.
The bottom line: A rebate model offers a straightforward, scalable way to modernize an outdated program, bringing rapid verification and real accountability while preserving support for true safety-net providers and the patients they serve.
Learn more at PhRMA.org/340B.
Elise Shutzer
ICYMI: Fox business hosts call 340B a ‘Rotten System’ and ‘Cash Cow’ for hospitals
Scrutiny of the 340B program continues to gain traction in Washington and in the media. Across multiple Fox Business segments—including Varney & Co., Mornings with Maria and The Big Money Show—hosts and correspondents described the program as a “rotten system” and a “cash cow” for hospitals while highlighting concerns that 340B lacks accountability and may benefit hospitals more than patients.
What they’re saying: Fox Business coverage focused on growing concerns about waste, fraud and abuse in federal health care programs, including how some hospitals can buy medicines at steep 340B discounts and then charge patients significantly higher prices.
Without clear rules requiring those savings to be passed on to patients, hospitals can pocket the difference, raising serious questions about where 340B profit is going and whether patients are benefiting.
340B was once a small safety net program to help underserved patients afford medicines. As the program has drastically expanded, so have concerns that hospitals and their for-profit partners are using 340B as a profit stream, with limited transparency, accountability or evidence that patients are receiving lower costs or improved care.
Hospitals buy drugs at discounts of nearly 60% off of the list price, on average, but sometimes pay as little as a penny. They are then allowed to pocket the difference between what they pay and their reimbursement from insurers and patients.
Growing momentum for reform: As Fox Business highlighted, 340B has grown into the nation's second-largest prescription drug program. But they aren't the only ones taking notice.
- Senate HELP Committee Chairman Bill Cassidy's (R-LA) recently released a discussion draft to reform the 340B program. In the Fox segment, Cassidy observed that hospitals are "using these dollars however they see fit" and said lawmakers "just want some accountability."
- The Congressional Budget Office (CBO) reported that 340B increases federal spending, raises prices for taxpayers by encouraging the use of more expensive drugs, and reduces rebates for employers.
- HHS Secretary RFK Jr. recently described the program as a "boondoggle," adding to a growing chorus of policymakers calling for reform.
Bottom line: As both lawmakers and the media continue to examine the 340B program, pressure is mounting to demonstrate that program is delivering for patients, not just generating revenue for hospitals.
Learn more at PhRMA.org/340B.
Eliza Maciag
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