More Sunshine on 340B Good for Patients | Commentary

Posted July 23, 2014 at 5:40pm

In his recent opinion piece, Ascension Health CEO Robert Henkel pleads with Congress not to tinker with the 340B Drug Discount Program (“Placing the Health and Well Being of Patients First”, Roll Call, July 16). The program was created in 1992 to benefit medically underserved patients in the outpatient setting, but it has grown into a lucrative opportunity for many disproportionate share hospitals (DSH).

While some 340B-covered entities, like Ascension Health, work to serve large numbers of uninsured and medically underserved patients, the national data are equally clear that many 340B hospitals in the program aren’t quite so charitable. New data from a health care consulting firm Avalere, in fact, tell us that a quarter of all DSH hospitals benefiting from 340B are providing charity care at only a rate of one percent or less of their total patient costs. The DSH eligibility criteria, which is actually an inpatient measure and does not reflect the level of uninsured or charity care provided in the outpatient setting, are currently used as a proxy for demonstrating that a hospital is caring for medically underserved patients.

Yet more than two-thirds of DSH hospitals in the 340B program provide less charity care than the national average. We also must remember that DSH hospitals receive other sources of federal funding to help these hospitals serve their patients. Clearly we are using the wrong eligibility criteria for this program. Indeed, if criteria were more effectively tied to medically underserved patients who should benefit from the program, there is no doubt that more hospitals — which represent about 80 percent of all 340B volume today — might be in a position to report they provide the impressive levels of charitable care that Ascension does.

The desire to maximize 340B revenues is becoming intoxicating for many hospitals, driving them to look for more ways to increase these dollars. One way they’re doing this is by acquiring independent health care facilities; this is a particular trend in cancer care. This spring, the independent think tank IMS Health reported that the trend of 340B DSH hospitals acquiring dozens of community cancer facilities around the country, often eliminating the local facility entirely, and frequently increasing patients’ costs of cancer care. It is worth noting, moreover, that as 340B DSH hospitals add more satellite facilities in this way and in others, the satellites are not even held to the existing DSH criteria — flawed though they may be — and they are under no obligation to pass on the 340B discounts to patients who were intended to benefit from them.

With so much money to be gained from 340B, large retail pharmacies are now getting in on the action by contracting with and extending the reach of 340B DSH hospitals (by law, they don’t need to pass on these discounts). Moreover, the pharmacies — which were allowed into the 340B program as a way to expand physical access for underserved patients to the drugs they need — are largely outside the reach of those very patient populations. Most of them are in middle- and upper-class neighborhoods, according to data from Berkley Research Group.

These are troubling findings about a program that, according to former HHS Secretary Kathleen Sebelius, has “expanded beyond its bounds.” There’s little doubt of that. That the sunlight which is increasingly shining on the 340B program is prompting appeals for Congress to stay away and let the status quo remain is curious. Why would we want to prevent more oversight, accountability and transparency for an initiative that seems to have come off the rails in many important ways? Why wouldn’t we all want to make sure this program is working properly, and poised to stay in place to help vulnerable patients benefit from discount drug prices?

Getting to that point, however, means Congress must revisit and refine the laws creating 340B, not allow the status quo to continue. Congress has a vital part to play in revising DSH hospital eligibility criteria, including considering whether it is time to finally require DSH hospitals to show how they use 340B funds, and working to ensure that the beneficiary of this program is the vulnerable patient, not a hospital system or retail pharmacy chain.

With clear and compelling data pouring in raising very serious questions about whether the 340B program has fallen off the rails in critical ways, there has never been a more important time than now for Capitol Hill to engage.

Stephanie Silverman is a spokeswoman for the Alliance for Integrity and Reform of 340B.