Healthcare News & Insights

Drugmakers say hospitals making money off drug pricing program

Drug manufacturers are accusing hospitals that get steep discounts through a federal drug-pricing program of pocketing the savings to buy-up clinics, pay more staff and fund other projects rather than using it for patient care. 

453555897The drug-pricing program, known as 340B, gives certain hospitals and clinics that serve the poor a 25% to 50% discount when they buy prescription medications from drug companies, reports Kaiser Health News.

Critics say hospitals are making money off the program by passing on drug discounts to the poor and then reselling all kinds of drugs to patients with insurance at higher prices. Under the law, participants in the program are allowed to charge higher rates to insured patients and keep the additional money.

But critics say the program is out of control and needs a major overhaul.

“That’s not what the program was designed for,” said Stephanie Silverman of the Alliance for Integrity and Reform of 340B, a lobbying group made up of drug companies and medical organizations.

“It was not designed to provide other revenues to support the operations of hospitals,” she said.

Program bloated, badly regulated

The Affordable Care Act (ACA) has expanded the program’s eligibility. Currently, over one-third of hospitals and clinics in the U.S. participate in 340B. Critics say the program has gotten so bloated and badly regulated that they fear not all of the hospitals in the program meet eligibility requirements.

“Hospitals are not only trying to maximize their own 340B revenues, they’re looking to acquire — and they are acquiring — many community oncology practices, putting them in their system and by doing so they can all of a sudden tap into new revenues they couldn’t get before,” Silverman said.

“Everyone sees this as a cash cow,” said Maya Bermingham, vice president and senior counsel at Pharmaceutical Research and Manufacturers of America, a drug industry trade group. “You can actually make money off this program and that was not really the intent of the program when it was formed.”

The federal Health Resources and Service Administration (HRSA) runs the 340B program. Its administrators have vowed to clarify the rules. However, a recent ruling in federal district court has called into question whether the HRSA even has the authority to do so.

Hospitals use savings for vital patient care

Hospitals that benefit from 340B are staunchly defending their use of 340B savings for specialized clinics, trauma care, burn units and uncompensated care.

Mount Sinai Hospital in Chicago uses the $2 million it receives in savings each year by participating in 340B to help fund a clinic for patients with neurological conditions, such as strokes.

Henry Ford Health System in Detroit, uses the $470 million the drug discount program saves them to fund one-third of the hospital’s uncompensated care.

“We find it highly ironic that the pharmaceutical industry is talking about cash cows,” said Ted Slafsky, president and chief executive of Safety Net Hospitals for Pharmaceutical Access. “They are the ones who are profiting off the skyrocketing costs of pharmaceuticals. Without the savings the program provides, participating hospitals would have to cut back on vitally important services.”

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