On August 8, Benjamin Oldfield, MD, posted an opinion about the need to stand up against Big Pharma’s war on health centers. I would like to address a different perspective on the issue, and how it affects patients in Connecticut.
This situation is not because of Big Pharma going after health centers – it is a federal program gone awry, and our best hope is to push for accountability and transparency from our local hospitals and pharmacies — the ones in the 340B drug pricing program that allows them to buy outpatient drugs from the manufacturers at a discount. At the same time, federal reform will be needed, but public pressure in Connecticut can be a very powerful tool to ask tough questions of our state health system, and to engage with our federal legislators.
There is a federally funded program, commonly called “340B”, that, according to the Health Resources and Services Administration was created in 1992 to “enable eligible safety net providers to stretch scarce federal resources as far as possible in essence to enable the health care providers to provide more health care services, and to reach more patients. Since 1992, the 340B drug discount program has enabled covered entities to purchase outpatient drugs at a 25 to 50 percent discount. Manufacturers must participate in the 340B program as a condition for participating in the Medicaid program. Manufacturers participating in the Medicaid program agreed to charge covered entities a price that will not exceed the 340B B ceiling price. This is a discounted price.”
This was a well intended program that basically allowed hospitals and facilities that provided specific levels of charity (indigent) care to inpatients in their communities, to then purchase outpatient drugs under the 340B discount program, bill for those discounted drugs at regular contracted rates for all outpatients (not just indigent), and retain the margins between cost and income to be used as the health care providers wished within their communities and medical services offerings. There were no stipulations on how exactly those margins were to be used, as long as the health care provider qualified as a charitable provider to receive 340B drug discounts. Manufacturers were not given a choice about being required to provide these discounts, but were allowed to avoid providing multiple other discounts on top of this program (which may be part of the issues raised by Dr. Oldfield.)
Patients do not usually hear much about the program, since it is up to the healthcare provider to qualify, and what they do with earned margins from participating in the program are not usually reported or publicized. However, that may need to change.
The program is based upon the high levels of charitable care provided by the health care provider in their community and is intended to provide funds for that provider to continue to serve their community as best they see fit. Over the last few decades, the income from margins available under the 340B program has grown significantly. Healthcare providers like hospital systems have used that income to purchase large numbers of private physician groups, exponentially increasing the volume of their outpatient drug purchases, on which they could then earn even more margins/income.
In many states, there are no private oncology practices left for patients to use. All the practices have been purchased by hospital systems. Oncology outpatient drug volume is one very attractive way for hospitals and pharmacies to greatly increase 340B income – by buying at the 340B discount and billing to patients, employers and insurance companies at normal contracted rates – which are most often at a higher cost than identical drugs provided by treating private physicians.
In Connecticut, patient access to private physicians has decreased dramatically, and billed hospital outpatient rates for needed drugs are higher than the bills patients had received before when their physicians were not employed by a hospital. These higher prices affect insured as well as uninsured outpatients. States like Connecticut have little control over these health market changes because they are driven by federal initiatives.
This well-intended federal 340B program has exploded. For-profit contracted retail pharmacies (“contract pharmacies”), large health systems, and the number of eligible outpatient sites have grown from a few hundred in 1995 to over 23,000 in 2023. The 340B program now impacts the lives and health outcomes of millions of Americans, often in adverse ways that are not widely reported. There needs to be more accountability, and the recent focus on the failings of the 340B system is trying to do just that.
Let’s look at the Connecticut numbers. According to recent survey data from the Pioneer Institute, 60 percent of contract pharmacies in Connecticut that are intended to serve low income communities are located in affluent towns. It’s no secret that Connecticut suffers from deep historic fiscal and racial inequities, but the 340B program has only exacerbated that. But, even if a low-income resident can travel outside of the local community upon which a 340B program eligibility was based, more than 30 percent of contract pharmacies run by our state’s largest hospitals are run outside of Connecticut! All of the top 5 have contract pharmacies as far away as Texas. Why should a Texas pharmacy be making 340B profits on the needs of Connecticut residents?
The current 340B escalation raises even higher concerns when you look at the money the 340B program is also pulling in for the insurance industry, and especially for-profit Pharmacy Benefit Managers (PBMs) that are finding ways to use the income they make through contracted pharmacies on discounted 340B medications.
However, getting that data is not easy. Since their inception, PBMs have found ways to operate under the radar, enacting barriers to care, frustrate health care providers, and put our patients in precarious and uncharted waters in order to get the treatments that CT patients’ physicians deem necessary to their health.
Congress has recently taken steps to move forward with 340B and PBM regulations, and for that they should be applauded. Our congressional delegation, particularly Sen. Chris Murphy, sit on key committees that have the ability to make turn the tide on what was a good idea and get it back on track.
Connecticut’s most-in-need patients, and those in similar situations across the country deserve to have access to the treatments that were in good faith intended to benefit them locally. It is time to regulate and reform 340B on the federal level, but we cannot turn a blind eye to the impact of these programs locally, or how we can voice our concerns.
I would love to talk with others about concerns for transparency here in Connecticut. We should be able to ask our local 340B eligible providers about the balance between their 340B income and the charitable care provided for the outpatient drugs needed by Connecticut patients. Whether or not that is part of the federal program requirements, it should be able to be discussed on a local level as a fair question.
We should discuss the impact on patients of shifting outpatient care from the private setting to the hospital-based setting and consider the cost of those shifts on Connecticut patients, employers, and the state in general. These are valid questions about a federal program suffering from limited monitoring and enforcement. These are the relevant actions for us in Connecticut related to the 340B program – not blaming pharma for managing an out of control program that was created at the federal level.
Dawn Holcombe is Executive Director of the Connecticut Oncology Association.