Drug discount program is exploiting poor patients while corporate giants profit
People on Medicare spent $3.4 billion out of pocket last year on the 10 drugs selected Tuesday for Medicare price negotiations. Photo via iStock/Getty Images Plus.
Minnesotans, with their long-valued sense of fairness and decency, would never suggest that Fortune 500 corporations should boost their already-healthy revenues at the expense of our fellow citizens who are economically hurting and who have serious health care needs. And, yet, there is a bill pending in the Legislature that would enable the prosperous to profit over the poverty-stricken, and there needs to be a bright light cast on what is happening before this absurd financial imbalance is codified in state law.
The federal 340B drug discount program was created three decades ago to help economically vulnerable Americans access affordable prescription medications and providers in underserved areas expand and improve services. Under the program, drug companies participating in Medicaid — known in Minnesota as Medical Assistance — provide sizeable discounts as high as 50% to these ‘safety net’ health care facilities.
Unfortunately, over time, the tens of billions of dollars flowing through this program have proven irresistible to for-profit corporate entities, including giant health systems and big box chain pharmacies — and there is no guarantee those discounts are reaching patients.
The federal government decided — without providing the necessary accompanying oversight — to allow 340B-eligible hospitals without on-site pharmacies to contract with outside drugstores to dispense medications to patients. This change created a loophole big enough to ram a Walmart store through.
Last year alone, large chain pharmacies like CVS, Walgreens and Walmart and pharmacy benefit management companies like Express Scripts and Optum Rx took $3 billion out of the 340B program, as the number of 340B contract pharmacy arrangements has exploded by more than 5,000% in the past 14 years.
What makes this money diversion particularly egregious is that the patients in need of both medicines and financial savings aren’t being helped. The majority of off-site contract pharmacies aren’t even in the same zip codes as the hospitals with which they are affiliated, and many are located in comparatively wealthy communities.
Worse yet, according to a report from the Government Accountability Office, many of these big pharmacies are gaining drugs at 340B discounted prices and then not passing those discounts along to the low-income patients getting their prescriptions filled. You read that right. Minnesotans burdened with financial insecurity are paying full price for drugs even as the chain drugstores dispensing those medicines see their profits soar as a result of federally-mandated discounted prices.
The GAO isn’t the only one ringing the alarm. 340B program abuse is well-documented by the New York Times, Wall Street Journal, and the Department of Health and Human Services’ Office of the Inspector General. Those reports have resulted in a Congressional investigation. They illustrate how the continued exploitation of 340B disproportionately impacts minority and underserved patients, increasing the burden on these communities and exacerbating existing health disparities.
Sayeh Nikpay, a University of Minnesota School of Public Health professor, presented to the House Health Finance and Policy Committee last December and has done extensive research on the 340B program. In a recent interview, Nikpay summarized her studies:
“My research finds that the 340B program creates perverse incentives for covered entities. I have used large, nationally representative, administrative datasets to show that:
Hospitals that begin participating in the 340B program do not meaningfully increase their safety-net engagement.
The 340B program’s eligibility criteria poorly target safety-net providers.
Contract pharmacies are less likely to be located in medically underserved areas, or areas with higher uninsured rates.”
It is evident that the 340B program is in dire need of change. But big box pharmacies and PBM middlemen don’t want to see alterations anytime soon. That’s why they are lobbying state legislatures around the country to lock in their ability to participate in the 340B program.
There is one such bill in the Minnesota House (HF4991) that is being described as a measure to prevent “discriminatory practices” against pharmacies receiving steeply discounted drugs. What this bill would actually do is codify the ability of giant corporate chains and middlemen to continue profiting at the expense of those who the program was intended to help. And the long-term danger here is that if the 340B program continues to expand by billions of dollars — dollars that are not being sufficiently used to help the underserved and the underprivileged — it could very soon become unsustainable.
Then, at-risk Minnesotans and safety-net providers serving our poorer communities will have lost a vital lifeline.
This drug discount program needs to be fixed. It needs to return to its original mission to help those in need instead of the rich. The first step, though, is to avoid further distorting the 340B program into a corporate profit center and that means killing the misguided bill currently pending in St. Paul.
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