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Report: 340B Drug Program Rife with Abuse, Profiteering

By Gregory A. Freeman  
   December 19, 2017

The program has also led to a rising trend of healthcare consolidation, Winegarden says, as independent practices are not eligible for 340B discounts and are losing patients. The 340B program has played a role in how hospitals have increasingly acquired independent practices and set them up as hospital outpatient departments, the report concludes.

“Judging the 340B program on its outcomes, not intentions, reveals that the program is, at best, a very expensive and inefficient way to help vulnerable populations afford the medicines they need. It is, consequently, in desperate need of reform," the report states. "The best politically feasible reform would return the scope of the 340B program to its original purpose of serving uninsured and low-income patients, and improve the oversight and administration of the program."

Specifically, the Pacific Research Institute says Congress and the Trump administration should update the law governing the 340B program so that it clearly defines who qualifies for the discount. This should include only those patients who are truly in need, the report says.

“This would ensure that the subsidized drugs would only benefit the intended patients, and it would prevent covered entities from exploiting the program as a potential profit center. Non-340B patients would also benefit since drug prices would no longer reflect the cross subsidies necessary to offset the loss of revenue caused by the abuse of the 340B discount program,” the report says.

Last month, the Centers for Medicare & Medicaid Services announced a final rule to cut payments by 28%, or about $1.6 billion. About 40% of U.S. hospitals use the program.

Related: Heated And Deep-Pocketed Battle Erupts Over 340B Drug Discount Program

“Additionally, since the program is intended to help the vulnerable populations, measures should be adopted that ensure that the 340B savings are passed along to the uninsured patients when filling their prescriptions at the covered entities or their contract pharmacies,” the Pacific Research Institute report says. “The possibility that these populations do not receive discounted prices when purchasing their medicines violates the entire spirit of the program. More stringent oversight practices should also be implemented to eliminate the proliferation of abuse in the program.”

The Pacific Research Institute describes itself as a nonpartisan nonprofit that "champions freedom, opportunity, and personal responsibility by advancing free-market policy solutions" in healthcare and a variety of other areas.

Gregory A. Freeman is a contributing writer for HealthLeaders.

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