25 Mar Congressional Efforts to Cut Medicine Costs Threaten 340B Drug Discounts
Currently there are two bills under consideration in Congress that attempt to address the problem of sky-high pharmaceutical prices. These bills would squeeze savings out of the drug supply chain, but they also threaten to have a devastating financial impact on safety-net health care providers in the 340B drug discount program that are on the front lines in our nation’s war against the coronavirus.
Under our current system, drug manufacturers enter into private contracts to have their medicines added as a formulary for pharmacy benefit managers (PBMs) prescription benefits for their patients. The PBMs receive rebates for the drugs they cover from the manufacturers that are dispensed at pharmacies. The PBMs then establish contracts to pay pharmacies for those medicines without passing on the full amount of the discount/rebate. It’s likely that the PBMs keep a sizeable share of those discounts, so critics contend PBMs and Medicaid managed care organizations (MCOs) are overcharging state governments and certain pharmacies.
The proposed legislation (section 815 of H.R. 3 and section 206 (6)(a) of S. 2543), takes aim at this relationship and attempts to force some transparency into the arrangement. The current language in the bills would require PBMs and MCOs that participate in the Medicaid program to stop making money on the spread between their acquisition price and the sale price.
While in many respects this is a good idea, as currently written, this requirement would wrongly apply to the federal 340B drug discount program. Safety-net health care providers who participate in the 340B program would no longer receive the benefits of discounts on these drugs, as originally intended by Congress.
That’s a BIG problem.
Safety-net hospitals report that a loss of 340B savings would negatively affect their ability to provide patient services, including the provision of primary care, oncology, and diabetes services as well as their provision of free or discounted drugs to patients in need. Many of the hospitals currently on the front lines in providing critical care to Americans with coronavirus would take a big financial punch in the gut. Among rural hospitals, more than 90 percent report relying on 340B savings to keep their doors open.
The 340B program has been highly successful for almost 30 years – and doesn’t cost taxpayers a dime. As Congress considers legislation to control drug prices, it should hold harmless the safety-net hospitals and clinics that depend on 340B drug discounts to help them care for uninsured patients with coronavirus as well as the neediest among us.