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Report misses mark on 340B program

By Tom Nickels
October 10, 2017

The latest report from AIR340B, a group financed and backed by the pharmaceutical industry, continues to misrepresent a program with a successful 25-year history of helping hospitals stretch scarce financial resources to expand and improve access to lifesaving prescription drugs and comprehensive health services for the many patients served by participating hospitals. The report attempts to mislead the debate by comparing changes in the “charity care” provided by a small sample size of 160 disproportionate share hospitals (out of 1,269 DSH 340B hospitals) that participate in the 340B Drug Pricing Program.  

First, at its core the purpose of the 340B program is to allow hospitals to expand access to and the type of services available in their communities. Charity care – free or discounted care – is only part of the story of how savings from this program underwrite participating hospitals’ total community benefit. It does not account for the many other programs and services that hospitals provide to meet the needs of their community and the amounts required to close the gap between the actual cost of care and Medicare and Medicaid payments to care for elderly, disabled and poor Americans.

In comparing savings from costly prescription drugs to the benefits 340B hospitals provide and how important those savings are in underwriting access and services, it is also important to note that:

  •      In 2015, 340B hospitals provided $23.8 billion in uncompensated care. That number dwarfs the total amount of discounts provided by pharmaceutical companies to hospitals and other eligible organizations that participate in the 340B program. 
  •      In 2015, one out of every four 340B hospitals had a negative operating margin. In addition, for outpatient services, 340B hospitals had total and outpatient Medicare margins of negative 18.4 percent and negative 15.4 percent, respectively, whereas hospitals overall had total and outpatient Medicare margins of negative 15.5 percent and negative 13.5 percent, respectively. In contrast, in 2015, pharmaceutical companies averaged a 25.4 percent positive-net margin.  

Second, the report claimed that of the160 hospitals studied, 70 DSH hospitals that participated in the 340B program for the first time in 2015 had lower reported charity care levels in 2015 compared to both 2014 and 2013. However, the report itself acknowledges that comparison is disingenuous as the overall reduction in the uninsured population in the years analyzed is largely because of the expansion in health care coverage.

Third, the report doesn’t even acknowledge the many services that 340B hospitals provide to the communities that they serve. For example, hospitals use the savings to:

  • provide financial assistance to patients unable to afford their prescriptions; 
  • provide clinical pharmacy services, such as disease management programs or medication therapy management; 
  • fund other medical services, such as obstetrics, diabetes education, oncology services and other ambulatory services; 
  • establish additional outpatient clinics to improve access; 
  • create new community outreach programs; and 
  • offer free vaccinations for vulnerable populations.

We hope policymakers won’t be diverted by this self-serving report from the important job of finding solutions to bring down the exorbitant cost of many prescription drugs that is threatening the availability of life-saving medications for millions of Americans.

Topic: Advocacy and Public Policy
Tag: 340B

Tom Nickels is the American Hospital Association Executive Vice President of Government Relations and Public Policy.



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