Revamp 340B drug discount program

OPINION:

Within the Beltway, the story is all too familiar: a new government program, buoyed by intentions so noble that no one can argue against it, is derailed by loopholes, allowing clever stakeholders to thwart its purpose and use it to enrich themselves. It happens again and again — and it happened with the 340B Drug Pricing Program.

On Nov. 4, 1992, President George H.W. Bush signed 340B into law, with wide bipartisan support and no significant opposition. The measure forced drug manufacturers to offer considerable discounts to a small number of safety net hospitals and clinics serving low-income patients.

The law was in reaction to the implementation of price controls in Medicaid that had the unintended consequence of drying up the free drug programs companies previously voluntarily offered. In turn for these new 340B discounts, clinics serving indigent patients were expected to do right by them by providing medicines and services free of charge or at a discount.

Because the program lacked safeguards, however, health care conglomerates were allowed to game the system by taking advantage of lax oversight and turning 340B into a cash cow, a way for the unscrupulous to line their pockets on a monumental scale. Suddenly, tax-exempt hospitals and clinics were buying discounted medications, often for pennies on the dollar, before turning around and charging patients the full price or more. In certain cases, large health care systems started contracting with pharmacies in upscale neighborhoods, where they knew people could afford the markups.

Instead of serving underserved patients, medical institutions began taking in a fortune. With zero transparency built into the system, it was virtually impossible to follow the money. Still, one thing was clear: The money was not going to the people who needed it.

The 340B program was instituted more than three decades ago, but the exploitation continues today. In fact, it’s getting worse. Every year from 2010 to 2021, spending on drugs under 340B increased by an average of 19%, much higher than the growth rate in the wider market.

The program has been so obviously broken for such a long time that it’s difficult to understand why it has not yet been reformed. A 2018 Government Accountability Office report concluded that oversight is almost completely absent in the program, yet to this day the Health Resources and Services Administration has failed to act on the report’s recommendations. In fact, HRSA has actively blocked drug manufacturers from determining whether 340B discounts are going to the people who need them.

It seems like such a determination would be a logical and responsible step, but the Biden administration threatened to remove those outspoken manufacturers from 340B, which would have also removed their medications from Medicaid and Medicare Part B.

Waste and, it seems, corruption have been allowed to continue unchecked.

Today, 340B providers and for-profit companies are receiving 18 times more on the dollar than they did 10 years ago at the expense of patients in need. The costs to the government and the taxpayers will only continue to rise.

By every reasonable metric, it is time for reform. In September, the Congressional Budget Office released its own report, which detailed how 340B actively rewards underhanded practices that increase federal spending and raise prices for American citizens.

As we speak, the 340B Affording Care for Communities and Ensuring a Strong Safety-Net Act is being floated. So is the Health Resources and Services Administration-proposed 340B rebate model pilot program. Both proposals should point the way as we ensure that discounts go to the people who truly need them. Oversight must be increased, transparency introduced and medical institutions held accountable.

It’s time for good policy to catch up with good intentions. Quality health care should be in everyone’s reach. Through commonsense reforms, Congress has the power to take the long, sad history of 340B and give it a positive future filled with healthy and prosperous Americans.

• Jack Kalavritinos served in the first Trump administration as Health and Human Services Secretary Alex Azar’s director of intergovernmental and external affairs and as associate commissioner of external affairs at the Food and Drug Administration.

Correction: A previous version of this column incorrectly added a co-author.