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Report: 340B Drug Program Rife with Abuse, Profiteering

By Gregory A. Freeman  
   December 19, 2017

A program designed to help poor people afford prescription drugs is being used by hospitals to generate easy profits, according to a Pacific Research Institute report.

A well-intended program designed to help poor people obtain prescription drugs is riddled with abuse and creates a perverse incentive for healthcare providers to game the system for profit, according to a Pacific Research Institute report.

The research, written by Wayne Winegarden, PhD, also says the program is hurting healthcare quality overall.

The 340B Program may have started with the best intentions but has evolved into a “complicated mess, rife with abuse, and has encouraged health providers to put profitmaking ahead of serving the poor,” says Winegarden, a senior fellow in business and economics at Pacific Research Institute. 

“Our study shows that Congress must reform 340B, so we can get back to the original mission—ensuring America’s poor have access to life-saving prescription drugs at a low cost,” Winegarden says.

The 340B Program extends Medicaid prescription drug discounts to healthcare providers that largely serve the poor, with participating drug manufacturers providing 20-50% discounts to qualifying clinics, hospitals, and pharmacies.

The federal government provides little guidance or oversight, however, so there is no requirement that hospitals provide the discounted drugs solely to people who are truly in need, Winegarden says.

Related: Could This Bipartisan Bill Protect 340B?

Hospitals can prescribe discounted medicines purchased through the 340B Program to patients who have insurance and can pay full price, he explains. The hospitals pocket the difference and thereby profit from a program intended to ease the financial burden on poor patients.

The practice is so brazen that more 340B hospitals have been set up in recent years to serve higher-income patients and secure more profit, he says. The rules of the 340B program itself contribute to the problem because discounts are based on a share of the drug’s costs, he says. That means participating hospitals are encouraged to prescribe high-priced medicines; they earn more revenue when prescribing the most expensive drug possible.

Gregory A. Freeman is a contributing writer for HealthLeaders.


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