Hospitals and for-profit PBMs are diverting billions in 340B savings from patients in need

Author(s): Ted Okon

STAT News published the below Op Ed from COA that does that highlights the dysfunction of the 340B system and how Hospital Systems and PBMs are profiting Billions of dollars a year off of a program that was intended to help underserved patients. Is a great “high level” review to help understand the overall impact on the US medical system and the importance of health care reform in this area.

America’s economically disadvantaged patients can point in two directions when talking about what is wrong with the 340B Drug Pricing Program, which is designed to help hospitals caring for underserved communities — and the patients they treat — keep necessary medicines reasonably priced: large supposedly “nonprofit” hospitals and for-profit pharmacy benefit managers that serve as 340B contract pharmacies, which together divert billions of dollars in savings that should be helping patients in need.

Begun in 1992, 340B is a federal program that requires drug manufacturers to provide significant discounts to eligible health care organizations that are supposed to treat high numbers of uninsured and low-income patients. This program is critically important to hemophilia, AIDS, and other community clinics known as grantees.

The problem is that the 340B program has become a slush fund for its other participants, the large, supposedly nonprofit hospitals and health systems. They buy drugs at steep 340B discounts, then charge insurers, the uninsured, and cash-paying patients a huge markup. The profits pad the hospitals’ bottom lines and provide ample capital to take over and consolidate local markets, particularly in cancer care. And the result is shockingly little charity care.

How exactly does this benefit patients who can barely afford their medicine?

As if this wasn’t bad enough, 340B became even more broken as new for-profit PBM participants found a way to make money from the charity-care program.

The government allows 340B participants without pharmacies to distribute medicines to patients via third-party pharmacies. These are known as contract pharmacies and, until 2010, were predominantly independently-owned, local community pharmacies. The problem began in 2010 when the government said all 340B participants, even those with their own pharmacies, could contract with an unlimited number of third-party pharmacies.

Author Affiliations

Ted Okon is the executive director of the Community Oncology Alliance, a nonprofit organization that represents independent community oncology practices and the patients they serve.

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