Do profits from drug rebates for charities help or harm CT patients?

On August 8, Dr. Benjamin Oldfield published a statement about the need to stand up against the pharmaceutical industry's war on health centers. I want to take a different perspective on the issue and explain how it affects patients in Connecticut.

This situation is not due to the pharmaceutical industry attacking health centers – it is a federal program gone wrong, and our best hope is to enforce accountability and transparency at our local hospitals and pharmacies – those who participate in the 340B drug pricing program that allows them to purchase outpatient drugs from manufacturers at a reduced price. At the same time, reform of federal legislation will be necessary, but public pressure in Connecticut can be a very effective way to ask difficult questions of our state health care system and engage with our federal lawmakers.

There is a federally funded program commonly referred to as “340B,” which, according to the Health Resources and Services Administration, was created in 1992 to “allow eligible social service providers to stretch scarce federal funds as far as possible to essentially allow health care providers to offer more health care services and reach more patients. Since 1992, the 340B drug rebate program has allowed covered facilities to purchase outpatient drugs at a 25 to 50 percent discount. Manufacturers' participation in the 340B program is a prerequisite for participation in the Medicaid program. Manufacturers participating in the Medicaid program have agreed to charge covered facilities a price that does not exceed the 340B maximum price. This is a discounted price.”

This was a well-intentioned program that basically allowed hospitals and facilities that offered certain forms of charity (indigent) care for inpatients in their communities to purchase outpatient drugs under the 340B rebate program, bill those discounted drugs at the regular contracted prices for all outpatients (not just the indigent), and maintain the margins between costs and revenues so that they could be used as they wished by the health care providers in their communities and for their medical service offerings. There were no regulations about how exactly those margins were to be used, as long as the health care provider qualified as a charity provider to receive 340B drug rebates. Manufacturers had no choice about whether they had to provide these rebates, but they were allowed to refrain from offering several other rebates in addition to this program (which may be part of the issues raised by Dr. Oldfield).

Patients typically do not learn much about the program because qualifying is the responsibility of the healthcare provider, and what they do with the margins earned by participating in the program is not typically reported or made public. However, this may need to change.

The program is based on the high level of charitable care that healthcare providers provide in their community and is designed to provide funds to providers so they can continue to provide the best care to their community as they see fit. Over the past few decades, revenue from the margins available under the 340B program has grown significantly. Healthcare providers such as hospital systems have used these revenues to buy out large numbers of private physician groups, increasing the volume of their outpatient drug purchases exponentially and allowing them to earn even more margins/revenue.

In many states, there are no longer any private oncology practices for patients to use. All of the practices have been bought up by hospital systems. The volume of outpatient oncology drugs is a very attractive way for hospitals and pharmacies to significantly increase their 340B income – by purchasing at the 340B discount and billing patients, employers and insurance companies at normal contracted prices – which are often more expensive than identical drugs provided by private treating physicians.

In Connecticut, patient access to private physicians has declined dramatically, and outpatient rates billed by hospitals for necessary medications are higher than the bills patients used to receive when their doctors were not employed by a hospital. These higher prices affect both insured and uninsured outpatients. States like Connecticut have little control over these changes in the health care market because they are driven by federal initiatives.

This well-intentioned federal 340B program has exploded. The number of for-profit contract pharmacies (“contract pharmacies”), large health systems, and eligible outpatient facilities has grown from a few hundred in 1995 to over 23,000 in 2023. The 340B program now impacts the lives and health of millions of Americans, often in adverse ways that are not widely reported. There needs to be more accountability, and the recent focus on the failures of the 340B system seeks to do just that.

Let's look at the numbers for Connecticut. According to a recent survey by the Pioneer Institute, 60 percent of Connecticut's contract pharmacies designed to serve low-income communities are located in affluent cities. It's no secret that Connecticut suffers from deep historical financial and racial inequities, but the 340B program has only exacerbated that. But even if a low-income resident can travel outside of the local community on which their eligibility for the 340B program is based, more than 30 percent of our state's largest hospitals' contract pharmacies operate outside of Connecticut! All of the top five have contract pharmacies in cities as far away as Texas. Why would a Texas pharmacy make 340B profits serving the needs of Connecticut residents?

The current increase in the 340B program is even more of a concern when you consider how much money the 340B program also generates for the insurance industry and, in particular, for-profit Pharmacy Benefit Managers (PBMs), who find ways to spend the revenue they generate through contract pharmacies on discounted 340B drugs.

But getting that data isn't easy. Since their inception, PBMs have found ways to operate under the radar, creating barriers to care, frustrating healthcare providers, and putting our patients in precarious and uncharted waters to receive the treatments that CT patients' doctors deem necessary for their health.

Congress recently took steps to advance 340B and PBM regulations, and they should be applauded for doing so. Our congressional delegation, particularly Senator Chris Murphy, sits on key committees that have the ability to turn a good idea around and get it back on track.

Connecticut's neediest patients, and those in similar situations across the country, are entitled to access the treatments that were intended in good faith for them locally. It's time to regulate and reform 340B at the federal level, but we cannot ignore the impact of these programs locally or know how to voice our concerns.

I would like to speak to others about concerns about transparency here in Connecticut. We should be able to ask our local 340B-eligible providers about the balance between their 340B income and the community benefit for Connecticut patients' outpatient medications. Whether or not this is part of the federal program's requirements, it should be able to be discussed at the local level as a fair question.

We should be discussing the patient impacts of shifting outpatient care from the private to the hospital setting, and considering the costs of that shift to patients, employers, and the state of Connecticut in general. These are legitimate questions about a federal program that suffers from inadequate oversight and enforcement. These are the actions relevant to us in Connecticut related to the 340B program—not blaming the pharmaceutical industry for managing an out-of-control program created at the federal level.

Dawn Holcombe is executive director of the Connecticut Oncology Association.

Do profits from drug rebates for charities help or harm CT patients?

You may also like...

Recent Posts

Do profits from drug rebates for charities help or harm CT patients?

You may also like...

A killer performance: Riverside’s “Murder on the Orient Express” impresses

UCSF researchers come closer to predicting sudden infant death

Police arrest Pee Dee teenager in connection with shooting investigation

Recent Posts