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

The Negative Impact of COVID-19 Upon the Biopharmaceutical Sector

0 Comments
/
Contrary to conventional wisdom that says the coronavirus pandemic will generally benefit biopharmaceutical companies, a new Pioneer Institute study finds many companies will emerge from the pandemic commercially weaker, dealing with delays in new product launches and with fewer resources to invest in research and development.

Study Finds Pandemic Likely to Negatively Impact Biopharmaceutical Sector

Contrary to conventional wisdom that says the coronavirus pandemic will generally benefit biopharmaceutical companies, a new Pioneer Institute study finds many companies will emerge from the pandemic commercially weaker, dealing with delays in new product launches and with fewer resources to invest in research and development.

New Report: Quality Adjusted Life Years (QALY) Methodology Discriminates Against Older Americans, Threatens to Deny Seniors Access to Life-Saving Care

New report asserts that with older americans more vulnerable during the COVID-19 pandemic, all health plans should avoid using the QALY methodology when assessing the value of care for older patients

Quality Adjusted Life Years (QALY): The Threat to Older Americans

0 Comments
/
This report examines how the QALY methodology to determine drug treatment value threatens to discriminate against older adults by placing a lower value on treatments that would extend the life of or improve quality of life for older patients.  This clear bias against providing access to therapies to seniors comes at a critical and especially vulnerable time for older Americans given the coronavirus disease (COVID-19). 

The Legality of QALY under the ADA

0 Comments
/
This new report outlines several potential legal violations and negative implications for disabled individuals related to the adoption of the quality adjusted life years (QALY) approach to drug value assessment, used most prominently by the Institute for Clinical and Economic Review (ICER).
A Woman Helping a Disabled Man in a Wheelchair

New Report & Legal Analysis Suggests ICER’s Quality Adjusted Life Years Methodology Violates the Americans with Disabilities Act

A new report, "The Legality of QALY under the ADA," outlines several potential legal violations and negative implications for disabled individuals related to the adoption of the QALY approach to drug value assessment, used most prominently by ICER.

Report: Rare Disease Patients Hurt by “One-Size-Fits-All” ICER Framework

0 Comments
/
This op-ed appeared in ICERWatch on June 26, 2019. The Institute…

Looming Challenges for ICER in Assessing the Value of Rare Disease Therapies

0 Comments
/
This report examines why the Institute for Clinical and Economic Review (ICER) and the Quality Adjusted Life Years (QALY) approach to value assessment is particularly ill-suited to assess the cost-effectiveness of orphan and rare disease treatments, which represent a rapidly growing sector of the biopharmaceutical marketplace.

Putting a Price on Life: The Coming Fight Over Government Rationing of Medical Care

0 Comments
/
This article appeared on The Mackinac Center for Public Policy…