Nearly all Americans nationwide agree: Lowering out-of-pocket costs for health care should be a top priority for policymakers. Luckily, there are commonsense policies Congress could implement to meaningfully address the cost burdens Americans face. These include things like making sure patients aren’t paying more for their medicines than their health insurance company or requiring first-dollar coverage, so insurance companies cover the cost of certain lifesaving medicines from day one of the plan year. These are concrete steps, but they aren’t the only ones Congress could take.
Take 340B. It would be a mistake if Congress continued to overlook the critically important need to fix the 340B Drug Pricing Program to ensure it is making medicines more affordable for low-income and other vulnerable patients.
Here's how the program is (not) working.
Biopharmaceutical manufacturers provide steep discounts on outpatient medications (amounting to tens of billions of dollars a year) to 340B covered entities, which include certain hospitals and community health centers. These savings are supposed to be used by 340B covered entities to ensure patients have affordable access to medicines. Instead, large hospitals can buy deeply discounted 340B medicines and then turn around and charge patients higher prices, often using profits to buy community-based physician practices in wealthier neighborhoods to generate even more revenue from the 340B program. Check out recent coverage from the New York Times and the Wall Street Journal on ways hospitals are abusing the program.
Here’s how 340B is hurting patients.
A lack of oversight and transparency has allowed these abuses to continue, resulting in reduced access to affordable care, greater health inequities and higher health care costs nationwide. Some key facts to keep in mind:
- 340B hospitals are gobbling up competitors in a way that consolidates health care providers and reduces access to needed care. A new analysis from Avalere looked at the characteristics of hospitals that underwent a merger or acquisition between 2016 and 2022. Compared to both the national average for all short-term acute care hospitals, as well as the average for hospitals that were purchased, buying hospitals were more likely to be larger (have at least 500 beds), not-for-profit and a 340B hospital. This consolidation creates powerful, large hospital systems that raise costs for patients and insurers, creating a financial barrier for patients trying to access medicines.
- The 340B program has devolved from one intended to make health care more equitable to one that drives disparities in how certain populations access care. In fact, a study published in Health Affairs found 340B hospitals were expanding into more affluent areas to generate higher profits, leaving the patients who really need this program behind.
- While hospitals get a discount so steep that some medicines only cost them a penny, they often charge patients inflated prices. Research has shown that 340B hospitals often prescribe more expensive medicines than non-340B hospitals and significantly mark up the price of medicines. These practices have unfortunate implications for what patients pay out of pocket. A Milliman analysis found the cost per outpatient prescription filled at 340B hospitals was, on average, more than 150% higher than the cost of outpatient prescriptions filled at non-340B hospitals.
Here’s how Congress can help.
Currently there are no requirements for patients to benefit from the 340B program, and hospitals can participate even if they engage in aggressive debt collection and provide minimal levels of charity care. For starters, Congress should require hospitals to offer low-income and other vulnerable patients a discount on their medicines. If hospitals get a discount, why shouldn’t low-income and uninsured patients? Congress should also update and strengthen hospital eligibility standards to ensure hospitals participating in the program do in fact support underserved communities.
When taking a holistic look at our health care system and areas that are impacting patient spending, the 340B program cannot be overlooked. It’s time to address the perverse incentives that expose patients to higher out-of-pocket costs and take steps to ensure the program supports low-income and vulnerable patients’ access to affordable medicines. Learn more at PhRMA.org/340B.