Massachusetts hospitals withdraw charitable care as revenue from federal 340B drug rebate program soars
“The 340B drug rebate program started with the best intentions: to make health care more affordable for low-income and uninsured populations, but has blossomed into a lucrative revenue stream for hospitals and pharmacies. who can arbitrate drug discounts”. – Dr. Bill Smith, Pioneer Institute
March 22, 2022
Over the past decade, hospital revenues generated by the federal 340B drug rebate program, originally intended to serve low-income and uninsured populations, have skyrocketed even as a number of major hospitals in the Massachusetts have reduced the level of charitable care they provide, according to a new study released by the Pioneer Institute. The Pioneer Institute study, “340B Drug Discounts: An Increasingly Dysfunctional Program,” notes that nationally, sales of 340B drugs have fallen from $9 billion in 2014 to $38 billion in 2020.
“The 340B Drug Rebate Program began with the best of intentions: to make prescription drugs and high-quality health care more affordable for low-income and uninsured populations,” said Dr. Bill Smith, Director of the Pioneer Institute of Life Sciences Initiative and co-author, with Pioneer Senior Fellow Josh Archambault, of the study. “The 340B program has unfortunately been turned into a lucrative revenue stream for hospitals and pharmacies that can arbitrate drug discounts. With the exception of a small number of specialist hospitals and clinics, the original aims of the program have largely been lost.
The Pioneer report also highlights many problems with the 340B program, noting that it has “served to enrich for-profit chain pharmacies and pharmaceutical benefit managers (PBMs), weakened community medical and oncology care, pushed patients to more expensive hospital services. care, has prompted the system to adopt more expensive therapies, while providing fewer and fewer services to low-income, uninsured people.
The report includes a number of federal and state policy recommendations to improve the 340B program, such as stricter definitions of patient eligibility and charitable care, and broader transparency and reporting requirements based on patient status. these institutions as not-for-profit entities. The report argues that the tax treatment of nonprofit hospitals, as well as their participation in the 340B program, should lend itself to a more generous offer of charitable care for vulnerable populations.
“Given the tremendous revenue growth from the 340B program, we expect to see a significant expansion in the provision of charitable care and services to low-income populations in these hospitals, as that was the program’s intent. “said Pioneer Senior. Companion Josh Archambault. “Unfortunately, we have seen the opposite scenario play out with 340B. Some institutions appear to be tripling, taking the extra money that comes with taxpayer-funded coverage extensions, reducing their charitable care amounts, and at the same time leveraging the 340B program to maximize revenue, which should be flat or decline with each expansion. coverage as more and more people have health coverage.
You can read the full Pioneer Institute report here.
about the authors
William S. Smith is a senior life sciences researcher at the Pioneer Institute. He has 25 years of experience in government and 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 has held leadership positions for the Republican House leadership on Capitol Hill, the White House, and the Massachusetts Governor’s Office. He received his doctorate with honors from the Catholic University of America (CUA).
Josh Archambault is President and Founder of Presidents Lane Consulting. He is a Senior Fellow at the Pioneer Institute, as well as at the Cicero Institute. His professional experience ranges from work as a senior legislative aide to a governor, legislative director to a state senator, to years of work for think tanks operating in thirty-five states, and in DC He is a regular contributor to the influential Forbes.com blog, The Apothecary. Josh holds a Masters in Public Policy from Harvard University’s Kennedy School of Government and a BA in Political Studies and Economics from Gordon College.
About the Pioneer Institute
Pioneer’s mission is to develop and communicate dynamic ideas that advance prosperity and 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 can prosper because we enjoy world-class options in education, health care, transportation and economic opportunity, and where our government is limited, accountable and transparent. Pioneer values an America where our citizens are well-educated and willing to test our beliefs based on facts and the free exchange of ideas, and committed to freedom, personal responsibility and free enterprise.
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