The 340B Program Is Right on Track

Ted Slafsky

Contrary to the highly misleading picture painted by critics, the 340B drug discount program is working as Congress intended and helping millions of underserved Americans receive better healthcare every year.

The pharmaceutical industry has gone to great lengths to misconstrue how the program functions in an effort to vilify safety-net hospitals. These are the urban and rural facilities across the country that care for all patients, regardless of their ability to pay.

Treating the poor is enormously expensive. That’s why Congress created the 340B program more than two decades ago and expanded the program during both Republican and Democratic leadership. By requiring highly profitable drug companies to provide discounted medications to hospitals that serve high volumes of needy patients, it created a mechanism for safety-net providers to “stretch scarce federal resources as far as possible, reaching more eligible patients and providing more comprehensive services.”

Here is how the program works. Hospitals receive discounts on outpatient drugs of between 20 and 50 percent. They give these meds away or provide them at a nominal cost to uninsured patients. For commercially insured patients, hospitals sell the medications at a price negotiated with insurance companies.

If hospitals and clinics were unable to realize savings from the program, there would be no value in taking part. Hospitals use income from the program to fund HIV/AIDS, diabetes, dental and primary care clinics that help the poor.

By definition, savings from the 340B program help the underserved. Each year, safety-net providers in the 340B program must meet strict eligibility requirements that demonstrate they treat high numbers of low-income Medicare, Medicaid, Supplemental Security Income and uninsured patients. Hospitals enrolled in 340B care for more than twice the number of needy patients as other providers and provide nearly twice as much uncompensated care – nearly $25 billion per year.

Accusations of rampant growth in the program are baldly misleading. Currently, there are about 2,000 340B hospitals. More than 1,100 of these are tiny rural facilities with less than 25 beds that became eligible in 2010 as part of healthcare reform. Many of these providers depend on 340B savings to help keep their doors open.

There is robust and ongoing oversight of the program. To date, there have been more than 250 government audits of hospitals and not a single one has been removed from 340B as a result. Conversely, there has been only one audit of a drug manufacturer since 1992 -- which raises its own issues of transparency.

The Health Affairs article referenced is a deeply flawed piece of research that looked only at the locations of the hospital clinics and not at the patients who go to them. Many needy patients travel long distances to receive specialty care. As well, the research did not compare 340B hospitals to those outside the program. Therefore, no meaningful conclusions can be drawn.

The bottom line? Big Pharma wants to dismantle the 340B program because it wishes to avoid doing its part to help care for the underserved in communities across America. It can well afford to do so. New estimates from IMS Institute for Healthcare Informatics show U.S. drug spending spiked over 13 percent in 2014, the highest increase since 2001.

The pharmaceutical industry is doing everything possible to misinform the public about 340B and the safety-net hospitals that depend on it to care for the underserved.

Ted Slafsky is President and CEO of Safety Net Hospitals for Pharmaceutical Access, an association of more than 1,000 hospitals in the 340B program.