Editorial Staff

Massachusetts Hospitals Pull Back on Charity Care as Revenue from Federal 340B Drug Discount Program Explodes

/in , , , /by Editorial Staff
Share on Facebook
Share on Twitter
Share on
LinkedIn
+

BOSTON, MA – Over the past decade, the revenue for hospitals generated by the federal 340B drug discount program, initially intended to serve low-income, uninsured populations, has exploded even while a number of important Massachusetts hospitals have reduced the level of charity care they provide, according to a new study published by Pioneer Institute. The Pioneer Institute study, “340B Drug Discounts: An Increasingly Dysfunctional Program,” notes that nationwide, 340B drug sales rose from $9 billion in 2014 to $38 billion in 2020.

“The 340B drug discount program started with the best of intentions: to make high-quality prescription drugs and healthcare more affordable to low-income, uninsured populations,” said Dr. Bill Smith, Pioneer Institute Director of the Life Sciences Initiative and co-author, with Pioneer Senior Fellow Josh Archambault, of the study. “The 340B program has, unfortunately, been transformed into a lucrative revenue stream for hospitals and pharmacies who can arbitrage drug discounts. With the exception of a small number of dedicated hospitals and clinics, the original goals of the program have largely been lost.”

WATCH: WEBINAR: “340B Program: Examining Patient Access to Affordable Medicines”

On March 22, Pioneer held a discussion on the efficacy and efficiency of the 340B program, with Pioneer’s Dr. William Smith, as well as nationally-recognized speakers Terry Wilcox, Executive Director of Patients Rising, and Robert Popovian, Vice President of Health Economics and Policy for Equideum Health.

The Pioneer report also highlights numerous problems with the 340B program, noting that it has “served to enrich for-profit pharmacy chains and pharmacy benefit managers (PBMs), weakened community-based physician and oncology care, pushed patients into more expensive hospital-based care, incentivized the system toward more expensive therapies—all while providing fewer and fewer services to the low-income uninsured.”

The report includes a number of federal and state policy recommendations to improve the 340B program, such as tighter definitions of patient eligibility and charity care, and more extensive transparency and reporting requirements commensurate with the status of these institutions as nonprofit entities. The report argues that the nonprofit tax treatment of hospitals, as well as their participation in the 340B program, should lend itself to more generous provision of charity care for vulnerable populations.

“Given the huge growth in revenues deriving from the 340B program, we would expect to see significant expansions in the provision of charity care and services for lower-income populations from these hospitals, as that was the intent of the program,” said Pioneer Senior Fellow Josh Archambault. “Unfortunately, we’ve seen the opposite scenario play out with 340B. Certain institutions appear to be triple dipping, taking the additional money that comes with taxpayer funded expansions of coverage, reducing their charity care amounts, and at the same time exploiting the 340B program to maximize revenue, which should be stable or going down with each expansion of coverage as more individuals have health coverage.”

You can read the full Pioneer Institute report here.

Watch: Hubwonk360 Host Joe Selvaggi talks with William Smith about the 340B Program

About the Authors

William S. Smith is Senior Fellow and Director of the Life Sciences Initiative at Pioneer Institute. He has 25 years of experience in government and in corporate roles, including as vice president of public affairs and policy at Pfizer, and as a consultant to major pharmaceutical, biotechnology and medical device companies. He held senior staff positions for the Republican House leadership on Capitol Hill, the White House, and in the Massachusetts Governor’s office. He earned his PhD with distinction at The Catholic University of America (CUA).

Josh Archambault is President and Founder of Presidents Lane Consulting. He is a Senior Fellow at Pioneer Institute, as well as Cicero Institute. His work experience has ranged from work as a Senior Legislative Aide to a governor, Legislative Director for a state senator, to years working for think tanks operating in thirty-five states, and in D.C. He is a regular contributor to the influential Forbes.com blog, The Apothecary. Josh holds a master’s in public policy from Harvard University’s Kennedy School of Government and a B.A. in political studies and economics from Gordon College.

About Pioneer Institute

Pioneer’s mission is to develop and communicate dynamic ideas that advance prosperity and a vibrant civic life in Massachusetts and beyond. Pioneer’s vision of success is a state and nation where our people can prosper and our society thrive because we enjoy world-class options in education, healthcare, transportation and economic opportunity, and where our government is limited, accountable and transparent. Pioneer values an America where our citizenry is well-educated and willing to test our beliefs based on facts and the free exchange of ideas, and committed to liberty, personal responsibility, and free enterprise.

Get Updates On Our Life Sciences Work!

Related Content

What To Do About 340B

In 1992, Congress thought it had a brilliant idea to help hospitals…

‘High’ U.S. Drug Prices Mask Freeloading by Other Nations

The drug company’s choice is to walk away from millions in revenue from a given country and deny their people a lifesaving drug, or swallow hard and accept an unfair price that is nowhere near the drug’s value. For the sake of shareholders and patients, drug companies typically accept the unfair price and devote the revenue to offsetting their previous investments. In short, other nations are freeloading off of American R&D.

A nuclear winter is coming for biopharma

The life sciences sector in Massachusetts — which has been flying so high for so long — is about to experience a very hard landing. With the adoption of prescription drug price controls in the Inflation Reduction Act (IRA), drug research and development — the heart of the life sciences sector in Massachusetts — is about to experience a nuclear winter.

Pioneer Study: Study Finds Patent Protections Fuel Biopharma Innovation that Helps Patients

Patent protections on new drugs have unleashed an unprecedented wave of innovation that has benefited patients and should be fiercely guarded, according to a new study published by Pioneer Institute. New research indicates that price controls contained in the Inflation Reduction Act will result in 230 fewer drugs coming to market over the next decade and job losses of between 730,000 and 1.1 million.

Ron DeSantis’ Silly Drug Importation Idea

Ron DeSantis proposed in November 2020 to import drugs from Canada for state agencies such as Medicaid, prisons and other public healthcare programs. The goal is to save $150 million in state taxpayer funds. But the Biden administration seems unlikely to approve the plan, and the FDA has raised objections. Here's why the DeSantis plan will not — and cannot — save even a dollar.

University Science Research Is Under Threat

The Biden administration's formation of a working group to “develop a framework for the implementation of the march-in provision of the Bayh-Dole Act" could have serious adverse consequences for university research and biopharmaceutical innovation. It represents a particularly dangerous threat to the thriving life sciences cluster in Greater Boston.

Lousy Healthcare for Thee but Not for Me

In recent years, pharmacy benefit managers (PBMs) have instituted programs to keep out-of-pocket drug costs high for patients. Why is the administration so eager to protect federal employees from high out-of-pocket costs but is perfectly happy for PBMs to enroll millions of other patients in these programs?

Opinion: Legislature should act on bill to limit out-of-pocket drug costs

S. 609, a bill that would limit out-of-pocket costs for patients paying for prescription drugs, is a clear step in the right direction. Massachusetts should join 16 other states that have passed similar bills to protect patients.

Opinion: Drug patents aren’t a ‘necessary evil.’ They save lives.

Drug patents are one of the most important public policy innovations in all of human history, and a boon to patients awaiting cures. Inventions only come when inventors are rewarded, not punished. Patents are not a “necessary evil.”

Study: High List Prices and Deep Discounts for Prescription Drugs Hurt Poor and Sick Patients

A new Pioneer Institute study illustrates how the current system of drug pricing and discounts leads to patients with challenging diseases being charged huge out-of-pocket sums to keep other premiums low, effectively imposing financial penalties on the sick to protect the healthy and wealthy.