House and Senate Drug Pricing Bills Would Hurt America’s Safety-Net Hospitals

By 340B Matters

The coronavirus pandemic continues to raise the issue of affordable medications for Americans. Several bills to control drug prices are still in the works in Congress but would have negative consequences for safety-net healthcare providers.

Everyone agrees on the problem. The cost of drugs has increased three times faster than inflation over the past decade. Pharmaceutical companies are raking in monster profits while steadily boosting prices. The news is filled with heartbreaking stories of people dying for lack of affordable maintenance medications.

The drug supply chain is byzantine and fixing it is no simple matter. Medicines flow from manufacturers to pharmacy benefit managers (PBMs) which take a cut of the action before negotiating with retail pharmacies. The deals struck between PBMs and manufacturers are private. Many critics suspect they are driving inexorable price increases.

The system is purposefully opaque and Congress wants to inject some transparency. Section 815 of H.R. 3 and Section 206 (6)(a) of S. 2543 take aim at PBMs and Medicaid managed care organizations that have used spread pricing to overcharge state governments and pharmacies. The bills would require MCOs to pay for all retail pharmacy drugs based on acquisition costs.

That sounds good – but there’s a major problem. The provisions as written would also apply to the 340B Drug Discount Program used by thousands of safety-net hospitals and clinics across the country.

The federal program requires drug manufacturers to provide discounted medications to healthcare providers that treat high numbers of underserved patients – many of them on Medicaid. These hospitals and clinics can generate revenue in some instances because of the cost savings of 340B which enables them to provide valuable benefits to their communities.

The money helps safety-net providers supply vital care to patients who cannot afford to pay for it – just as Congress intended when it started the 340B program in 1992. The funding supports a wide range of services, including low-cost and no-cost medicines, diabetes and HIV clinics and subsidized chemotherapy and neonatal care.

The current legislative provisions as written would cause a devastating financial blow to these hospitals and clinics in the midst of a global pandemic. And underserved communities would ultimately suffer from cutbacks in health services.

That’s bad for everyone.