By Amelia Hamilton
As healthcare costs rise for small businesses, some are pointing the finger at drug discount program 340B. While it might seem an easy target on which to pin the blame, the reality is far more complicated.
For more than thirty years, 340B has been helping Americans access medications they might otherwise be unable to afford while providing a lifeline for health care providers who serve a large proportion of poorer patients, and many of whose finances are therefore shaky. The program is the result of a bipartisan effort that granted pharmaceutical companies access to Medicare Part B and Medicaid markets in exchange for providing drugs at a discount to 340B hospitals, health centers, and clinics. That gave those drugmakers access to approximately half of the U.S. population — and the taxpayer money that funds their healthcare — and gave those hospitals, which serve predominantly rural and low-income patients, affordable medication.
Now, the program is being blamed for the way drug companies choose to do business.
One common allegation is that 340B increases payer costs by causing patients with insurance, or those who are uninsured but better off, to lose access to drugmaker rebates.
However, whether or not rebates are made available to those patients is up to drug manufacturers and cannot reasonably be blamed on the program itself. While federal law mandates that manufacturers provide 340B discounts to healthcare providers, it does not mandate that these manufacturers pay rebates to commercial buyers. Drugmakers can choose whether to offer those rebates to insured or self-insured individuals in addition to 340B discounts. Many manufacturers can — and do — choose to offer rebates to direct payers as well as pharmacy benefit managers for drugs to be included on a formulary. But others do not, because rebates and discounts additional to what 340B program participation requires mean less profit for drugmakers. It is, of course, their right not to offer those additional discounts or rebates, but to be clear, any loss of rebates to insured or self-insured individuals is a private market decision made by the drug companies. It is not dictated by 340B.
In fact, 340B discourages this behavior. According to the Congressional Budget Office, “The best price component…discourages manufacturers from agreeing to pay higher rebates to commercial payers by making it more costly for manufacturers to increase the largest rebate to those payers.” 340B healthcare providers typically have access to drugs at 20 percent to 50 percent off the market price so they can serve the vulnerable, low-income, and uninsured in our communities. This is what drugmakers dislike — steep 340B discounts that pharmaceutical critics of the program certainly do not want extended to the population at large. Hence the deployment of inaccurate, if appealing, “affordability” style talking points.
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It’s easy to see why people get confused, because drug companies use the term “duplicate discount” to apply to two different things – one of which is prohibited under 340B and one that is not. Medicaid duplicate discounts, in which a drug company pays a Medicaid rebate to the state on a claim that involves a 340B-discounted drug, are barred. In these cases, since the entity paying for the drug already received the 340B discount, they are not eligible for a second, or duplicate, discount.
However, commercial rebates are not duplicate discounts, because they are offered by the drug companies rather than being mandated — sometimes as an incentive to get a patient using and then continuing to purchase a specific drug. Therefore, the drug companies decide to whom they want to offer these discounts, and they have chosen not to offer them to insured or self-insured patients filling prescriptions through 340B entities. Of course, 340B providers can pass on those 340B discounts. But unsurprisingly, their interest in doing so is greater for a patient earning $40,000 a year who lacks insurance than a patient earning $120,000 a year with a platinum-level insurance plan, let alone a multi-millionaire who pulls up to the pharmacy in a Ferrari. By using the same term in referring to two very different situations, drug companies are deliberately confusing the matter – and the average American trying to understand what they’re doing.
Drug companies also lack transparency in other areas. Covered entities have to recertify every year, proving that they are both eligible and compliant. Audits are also conducted on 200 of these entities every year. Contrast this with the transparency required from the drug companies, only five of which are audited in any given year (though just about every quarter, we see a spate of headlines about how drugmakers were found to have overcharged 340B hospitals for drugs). At the same time, many have stopped providing discounts to certain pharmacies, which is illegal under the program’s requirements. Many of these companies are also pushing for 340B to change its model entirely – from a discount upfront to a rebate after purchase. This would require providers to float unreasonable amounts of money while waiting for a rebate to be processed. Of course, as it stands now, they get a discount upfront, and any coupons to reduce the price further or rebates on the back end have excluded 340B providers.
340B provides a vital safety net for patients in every state with no cost to taxpayers. Without this program, hospitals and other providers would have to limit their health services to patients and communities to a large degree, and undermining the program does the same thing. If 340B were substantially reformed, even its toughest critics agree hospitals in the program would seek a taxpayer-funded bailout — all to effect a regulatory change that benefits the pharma sector.
When looking to place the blame for 340B not participating in coupons and rebates, blame the drug companies that created the restrictions. And don’t believe the “duplicate discounts” hype.
Amelia Hamilton is a writer and communications professional from Michigan with more than a decade of experience in messaging to promote liberty. Through her work with different organizations and publications, she knows how to craft the right message for each audience to help them connect with policy issues. Amelia has undergraduate and master’s degrees in both English and 18th-century history from the University of St. Andrews in Scotland.
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