340B Rebates: A Truly Terrible Idea

The drug industry continues its efforts to eviscerate the 340B Drug Discount Program through a proposed rebate pilot program. Of the more than 1,200 comments posted to the Health Resources and Services Administration, a strong majority are against the idea.

Big Pharma wants to take control of 340B away from the government while degrading the quality of American healthcare by starving safety-net hospitals. Congress designed the 340B program as an up-front discount for hospitals that treat high numbers of poor and uninsured patients. The ultimate goal of a back-end rebate model is to pour billions in revenues into already bulging drug-industry pockets. Why? Because industry experts expect Big Pharma would approve far fewer rebates. A recent survey shows that waiting even one month for rebates would cause serious payroll challenges and could force potential layoffs for 27 percent of hospitals.

Here are three big reasons why turning 340B into a rebate model is stinking thinking:

1. Safety-net hospitals would lose 340B savings as new cuts to Affordable Care Act subsidies will knock an estimated 3.6 million Americans off their health insurance per year, according to the Congressional Budget Office. It is the mission of safety-net healthcare providers to treat all patients, regardless of ability to pay. A tsunami of uninsured patients is heading to the Emergency Room over the next decade.

2. Hospitals will have to pay upfront prices that are up to five times higher than current 340B acquisitions costs.

3. The proposed rebate model requires the transfer of massive amounts of patient data to the drug industry in violation of the Health Insurance Portability and Accountability Act. That includes diagnosis codes, date of service and the prescribing doctor.

Back in 1992, A bi-partisan Congress designed 340B as an up-front discount for good reason. The savings help safety-net providers cover services that regularly lose money. That includes ER departments, psychiatric bed and maternal care. A rebate program turns this well-proven model upside down, forcing hospitals to in effect lend billions to the drug industry in hopes of getting some of the money back down the road. The same survey shows the average annual float could be $9 million for hospitals with less than 138 beds to $208 million for facilities with more than 487 beds.

A bi-partisan group of 163 members of Congress recently wrote Department of Health and Human Services Secretary Robert F. Kennedy, Jr. to declare the rebate model terrible: “We are concerned that HHS’s pilot program will severely damage community health centers, safety net hospitals, and other providers that rely on the 340B program to provide comprehensive, quality services to their patients and communities.”

A rotten idea doesn’t get better with time.