Bluegrass Beacon - Transparency: the best medicine for 340B drug-pricing program

BluegrassBeaconLogo

If ever a well-intentioned government program was trusted too much and verified too little, it’s the 340B Drug Pricing plan created by Congress in 1992 to help indigent and uninsured patients acquire costly prescription medicines.

The policy forces manufacturers to sell those drugs to participating hospitals at reduced rates; some price at more than 50 percent below retail.

However, a lack of proper oversight combined with passage of the Affordable Care Act has resulted in a collusion between big hospitals, big pharmacies and big government, causing an explosion in the size of 340B.

More than 14,000 facilities have signed up despite the fact that 340B was initially meant to serve only about 90 safety-net hospitals and clinics. Spending on 340B ballooned from $1.1 billion in 1997 to more than $7 billion in 2013 and is projected to reach $16 billion by 2020.

The 340B cabal seems to force one industry – drug manufacturers – to subsidize huge profits of hospitals and big-chain pharmacies that likely don’t provide direct benefits to vulnerable and uninsured patients, at least not in proportion to the savings the facilities squeeze from makers.

Participating hospitals simply aren’t required to reveal enough relevant data needed to determine whether they use the 340B program as Congress intended or merely to enhance their bottom line.

A congressional hearing was finally held in March after a growing chorus of voices – including mine in a column last year – criticized Congress for failing to hold a single oversight hearing in the 22 years since 304B’s creation even though the Health Resources Services Administration (HRSA), the program’s oversight agency, admitted more accountability is needed.

But an effective prescription will involve more than tepid talk.

Answers are needed for fundamental questions, including the most-obvious one: Should hospitals offering extremely low percentages of charity care even be allowed to participate in the 340B program?

It doesn’t take a brain surgeon to suspect hidden, costly maladies and seek a second opinion on the condition of the program at places like Duke University’s rich hospital, which, according to a four-page letter to the HRSA from Sen. Charles Grassley, R-Iowa, reported 340B profits of $463 million between 2009 and 2012 while treating no more than 5 percent charity cases in any of those years.

While some Kentucky hospitals and clinics seem to correctly use the program by caring for large percentages of 340B patients, it’s certainly questionable whether others are passing on to vulnerable and needy patients the savings they receive – much less whether they even qualify for participation, considering how small a percentage of their overall revenues are devoted to charity cases.

For instance, there’s a stark difference in Louisville between University Hospital, where, according to the Centers for Medicare and Medicaid Services, charity cases comprised nearly 10 percent of their patient load in 2014, and Norton Healthcare, which, despite $1.5 billion in revenues and 53 contracted pharmacies, reported less than 1 percent of vulnerable patients.

Still, both are considered “Disproportionate Share Hospitals,” allowing them to purchase highly discounted 340B medicines.

We also see such disparities in other parts of Kentucky.

Charity cases in 2014 comprised more than 9 percent at St. Joseph Hospital in Mt. Sterling but less than 0.5 percent at T.J. Samson Community Hospital of Glasgow and The Medical Center of Bowling Green, which reported $125 million and $285 million in revenues, respectively, during that same year.

Yet all three hospitals claim to serve a “disproportionate” share of indigent patients and are eligible to participate in 340B.What’s needed are disproportionately large doses of transparency to help determine whether 340B hospitals are, in fact, passing manufacturers’ savings on to enough needy patients.

Some unquestionably are; others undoubtedly profit in big ways from failing to do so and should be rendered ineligible for further participation in the 340B program.

Jim Waters is president of the Bluegrass Institute, Kentucky’s free-market think tank. Reach him at jwaters@freedomkentucky.com. Read previously published columns at www.bipps.org.