Seven Ways Big Pharma Abuses the 340B Drug Discount Program to Generate Outsized Profits

By 340B Matters

The drug industry hates the 340B Drug Discount Program because it forces them to sell drugs at a lower cost to qualified non-profit health providers.

So, to evade the law’s requirements and generate more profits, manufacturers have hatched some creative schemes to reduce sales of lower-priced medications to the safety-net healthcare providers as required by law.

Here are some of the ways they do this that all drug-policy makers in Congress, HHS and HRSA should know.

1. Arbitrarily limit drug distribution.

Big Pharma is increasing the number of “limited distribution drugs” which forces patients to an outside specialty pharmacy instead of the health providers’ own.  Normally, such drugs are purchased by a hospital easily from a wholesaler, but by doing this, pharma is able to avoid paying 340B discounts to safety-net hospitals and clinics. Mission accomplished for the drug manufacturers.

2. Illegally impose data requirements and deadlines.

Leading drug makers now require reams of data from safety-net healthcare providers as a condition to receive 340B discounts. When providers supply the information (which is not a requirement of participating in 340B), pharma companies create new rules prohibiting data that’s more than 45 days old. Many hospitals dispense over time and look to replenish their stock at 340B prices after a full bottle or package size has been used. That takes time. If you’re late, no 340B discount. None of this is legal.

3. Illegally convert 340B into a rebate program.

New pharma-backed groups are working to turn 340B into a rebate program, which would require health providers to buy medicines at high prices and then get reimbursed later at 340B discounts. This would take away 340B pricing at the point of sale and thus require hospitals and clinics to use more cash on hand to purchase drugs without any guarantee the rebates would ever appear.

4. Change drug codes to deny 340B discounts.

Manufacturers have taken to changing National Drug Codes regularly. These numbers identify the drug maker, product and package size.  By making minimal changes to dosage or packaging, a drug company creates a new NDC. Then it tells hospitals it won’t supply 340B discounts on accumulated past prescriptions under the old NDC. Voilá, providers get stiffed.

5. Reduce reimbursements to Ryan White clinics.

Gilead has developed expensive yet lifesaving HIV PreP treatments and lowered the reimbursement to safety-net hospitals and clinics that use its assistance program. This has a particularly big impact on Ryan White clinics and their ability to provide services to their patients.  Health providers are reimbursed only at cost and lose the revenues generated from retail reimbursement. Cha-ching. Greediad wins.

6. Create artificial supply chain barriers.

Manufacturers are using third-party logistics companies to remove drugs from the normal supply chain and requiring hospitals and clinics to purchase drugs through these multiple wholesalers.  Often, the hoops are too numerous, and health providers give up on receiving the 340B discounts required by law.

7. Limit Patient Access.

Leading manufacturers have limited 340B pricing to a single-contract pharmacy. This makes it harder for low-income patients to get their medications close to home. It also robs health providers of 340B savings that help fund services for this population.

Pharmaceutical companies and their advocates don’t want you to know that they engage in these illicit practices. They spend millions of dollars on campaign contributions and lobbying fees to convince policymakers to join them in further weakening the program. Informed policymakers who don’t want to be complicit with these abuses should raise questions about the various ways drug companies manipulate the 340B Drug Discount Program to generate massive profits.