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Families across the commonwealth need solutions that will meaningfully lower their health care costs. As a pediatric rheumatologist, I’ve witnessed families making hard choices when their prescriptions become too expensive.
That’s why I find it incredibly upsetting when some Virginia hospitals and healthcare systems exploit and profit from federal programs intended to provide underserved patients with financial relief while serving as a safety net for those struggling to afford medications. Increased transparency and oversight are required to ensure that these programs directly benefit patients – not increase the profits of hospitals and other health care corporations.
The 340B Drug Pricing Program, or 340B, was created by Congress in 1992 to help low-income and uninsured patients living with conditions requiring costly outpatient medications access these necessary treatments and is a prime example of an essential safety net program. Through 340B, qualifying hospitals and clinics serving a large number of vulnerable patients can purchase deeply discounted medicines directly from pharmaceutical manufacturers with the expectation that they use these savings to help patients to afford and access their necessary medications.
In the past few years, many large hospitals and other corporations have turned the well-intentioned program into a profit-making scheme to improve their own bottom lines.
At 340B hospitals, the average cost per prescription is more than 150% higher for patients than at non-340B hospitals. Meanwhile, nearly 70% of 340B hospitals that care for many vulnerable patients are providing below-average levels of lower-cost or free care. What was once a little-known program intended to help our community’s most vulnerable has now ballooned into the second largest federal prescription drug program nationwide, with more and more hospitals profiting from 340B discounts. It has become a critical income source for hospitals — rather than an essential source of medications for eligible patients.
While many of the 340B entities — including federally qualified health centers (FQHC)s, Ryan White AIDS clinics, and other federal grantees — do an incredible job at caring for some of our state’s most vulnerable patients, patients and their physicians, including many of my Virginia colleagues, are concerned about ongoing abuse of the 340B program by large disproportionate share hospitals.
These hospitals, which make up 78% of the entire program’s spending, purchase and significantly profit from discounted 340B medications. Large hospital systems are increasingly acquiring pharmacies, practices and smaller health centers, such as oncology and infusion clinics, to further capitalize on 340B discounts without lowering patients’ costs or providing higher quality care. In fact, between 2016 and 2022, larger 340B hospitals were responsible for about 80% of hospital acquisitions.
These troubling incentives for hospital acquisitions and cost-shifting are leading to small clinic closures and less health care options for patients across the country — even in our own backyard.
As reported by The New York Times in 2022, Bon Secours Mercy Health, a prominent nonprofit health system, acquired Richmond Community Hospital, a cash-strapped community hospital, in 1995. In the following decades, Bon Secours abused its ownership of Richmond Community Hospital and took advantage of 340B discounted purchases while cutting services at Richmond Community Hospital, according to The New York Times. Medications purchased using the 340B program were given to commercially insured patients throughout the region while billing the commercial rates, thereby pocketing the price differences. Meanwhile, Bon Secours has one of the highest profit margins of any hospital in Virginia, generating as much as $100 million a year.
This program, originally intended to serve the most vulnerable patients, is now growing due to rampant abuse from hospital systems and for-profit corporations. In 2023 alone, 340B covered entities used the program to purchase over $66 billion in outpatient drugs — an over 23% increase from the year before. Much of this growth is due, in part, to 340B hospitals’ ability to also contract with an unlimited number of pharmacies — including those out-of-state — many of which are owned by the nation’s largest pharmacy benefit managers (PBMs) and insurers. As a result, PBMs and 340B contract pharmacies share in the massive profits from discounted 340B medicines. In fact, more than half of the entire U.S. pharmacy industry is contracted to dispense steeply discounted 340B drugs. But hospitals are not required to share these discounted prices with patients.
The numbers are clear — 340B has become less about helping vulnerable patients and their families access the care they need and more about hospital systems and other corporations capitalizing on these federally mandated discounts to improve bottom lines, or even boost executive compensation at hospitals.
While 340B is an important safety net in Virginia, it is in dire need of federal action to improve transparency and accountability measures to ensure it works as intended. Any proposed 340B policy that allows hospitals and other corporations to continue their rampant abuse must be reconsidered. Without action from Congress, hospitals, and corporations will continue to profit, while Virginia’s financially vulnerable patients and families are left without a functioning safety net to catch them.
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