21 Apr Drug Companies Reaping Billions from the 340B Program
By 340B Matters
Six huge pharmaceutical companies are breaking the law, denying safety-net hospitals and clinics lower-priced medications required by the federal 340B Drug Discount Program. Meanwhile, they’ve reaped the benefits of participation in 340B, selling $52 billion in drugs to the Medicaid and Medicare Part B markets annually.
What’s wrong with this picture?
Congress created 340B in 1992 to help safety-net healthcare providers stretch resources to better serve patients. In return for providing discounted medications to these facilities, the government gave pharmaceutical manufacturers permission to sell to the lucrative Medicaid and Medicare Part B markets. Starting last year, Eli Lilly, Merck, AstraZeneca, Sanofi, Novartis and United Therapeutics – the Shameful Six – refused to provide discounted meds to hospitals and clinics that contract with local pharmacies to distribute drugs closer to patients.
Lawsuits are piling up over the move, but the basic math of the issue shows the pure avarice of the companies involved. According to the Center for Medicaid Services and industry data, the leader of the pack, Eli Lilly, sold $9.5 billion in medications to Medicaid and Medicare Part B in 2019. That same year, the company sold an estimated $489 million in drugs to 340B providers. That number represents an average discount of 37.5 percent. So, in effect, Lily “paid” $293 million (the amount discounted) in order to be able to sell $9.5 billion of its medicines to the Medicaid and Medicare Part B markets.
That represents a hefty 3,142 percent return on investment. Apparently that ROI is too puny for Eli Lilly, so it has decided to break the law to get an even higher rate of return at the expense of pandemic first responders.
But wait, it gets worse.
Let’s look at the numbers for Novartis, another of the “Shameful Six” cabal. It sold an estimated $82 million in discounted 340B drugs in 2019 and reaped a handy $7.7 billion from Medicaid and Medicare Part B sales. The ROI? A mind-boggling 9,290 percent.
As a group, the Shameful Six sold an estimated $1.8 billion in 340B drugs that year and enjoyed $52 billion in revenues from Medicaid and Medicare Part B. And, of course, the communal ROI was highly advantageous: 2,788 percent.
You get the picture. These companies are receiving a massive return for participating in the 340B drug discount program. They are reaping billions of taxpayer dollars and yet are currently boosting ROI even more by stiffing safety-net healthcare providers out of legally required discounts. Meanwhile, the drug industry as a whole enjoys net profit margins 6 percent higher than the rest of the business world.
So when you hear these manufacturers spew specious rhetoric about the 340B program, ask yourself: Why isn’t a 2,788 percent return investment good enough?
Ugly is greed.
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