Christopher Versace of Forbes wrote on March 30, 2015, his take on the recent Congressional review of the 340B program. He calls out pharmacy chains which have charged high rates to participate in the program, and even calls out a 340B administrator by name for their lobbying for expansion of the program. Versace’s view captures some important truths about the program, but also reiterates some assumptions about the program’s purpose which are not reflective of the letter of the law.
Versace’s view is summed up in his quote, “the sad reality is in most cases the poor never see the [340B] discounts.” Many of those seeking to reform the program are starting with the assumption that the intended mechanism of the program is to directly increase access to that patient population by expanding access to care and, more pointedly, that the sole intent of the legislation is to reduce drug costs to people who can’t afford care. Unfortunately for the political debate, this view is not supported by the text of the law, the intentions of the House Report that originated it, nor the actual mechanics of the 340B program.
Before the law was enacted in 1992, the Committee on Energy and Commerce prepared a seminal report endorsing support of qualifying hospitals. The stated purpose in the report is “In giving these ‘covered entities’ access to price reductions the Committee intends to enable these entities to stretch scarce Federal resources as far as possible, reaching more eligible patients in providing more comprehensive services.” The program works by allowing drug price reduction for all eligible outpatients, reducing overall costs for eligible non-profit hospitals. This leaves it —by design— to the hospitals to determine how to utilize the savings to “reach more eligible patients” and “provide more comprehensive services.” Mr. Versace may be right that it’s sad that poor patients are not receiving additional discounted or free drugs, but it would also be sad if critical access hospitals had to shutter their doors completely.
Despite the colored language, Versace’s broader point is on target and critical: the 340B program is under scrutiny, and covered entities, 340B administrators, and pharmacies need to respond. The 340B program subsidizes United States health care without direct cost to taxpayers, consumers, or even insurers. The participants in the program need not only to utilize the program effectively to increase patient access to healthcare, but need to increase transparency in demonstrating compliance to program standards and to its objectives. It’s not sufficient to be compliant, but to demonstrate that the program is beneficial as intended.
Contract pharmacies should be receiving a reasonable fee for their part in helping to expand health care services, but Versace is right that there have been clear cases where pharmacy chains with leverage have taken more than a reasonable slice of what should be going to covered entities. Similarly, 340B administrators are providing a service for which they should be generating a reasonable fee. All covered entities should be transparent in the portion of savings actually accruing to them, and consider sharing the benefits of those savings more widely.