Texas has a disproportionately large number of low-income income and uninsured residents, so it would seem good news that there is a federal program designed to help those populations access lower-cost prescription drugs.
The federal 340B program, which passed in 1992, takes a unique approach to delivering lower prescription drug prices.
The initial idea was that drugmakers would be required to provide significant discounts to hospitals that serve a disproportionate share of low-income and uninsured patients — something many drugmakers did voluntarily in the 1970s and ‘80s.
The hospitals would then pass those savings on to outpatients by charging them lower prices.
But hospitals eventually realized they could keep a larger portion of the discounts by raising the price patients pay. In other words, 340B could become a hospital profit center, not just a pass-through to help the poor.
As more nonprofit hospitals recognized the financial potential from 340B, they applied to be included in the program. Today, some 3,000 hospitals participate nationwide, including nearly 100 located in Texas.
And it’s not just hospitals. Thousands of clinics also participate in 340B, as do retail pharmacies that contract with participating hospitals and clinics. The number of participating contract pharmacies grew from 789 nationwide in 2009 to 32,500 today.
And the majority of these pharmacies are owned by pharmacy benefit managers, which act as middlemen between drugmakers and pharmacies.
Benefit managers have become controversial because they siphon off excessive profits from a system intended to provide patients with lower drug costs.
With many more hospitals and pharmacies participating in 340B, spending exploded from $6.6 billion in 2010 to $43.9 billion in 2021, according to the Congressional Budget Office — a nearly seven-fold increase in a decade.
Are some of the hospitals, clinics and pharmacies following the program’s parameters and passing on the lion’s share of the discounts to patients?
Probably, but there is no requirement that they do so and no easy way to tell how much of the drugmaker-provided discount is being passed on to patients.
But there are estimates. According to the Medicare Payment Advisory Commission, an independent congressional agency established to advise Congress on issues affecting Medicare, “10 percent of products had a Medicare payment rate at least 145 percent above the 340B ceiling price.”
So it’s clear that many patients are paying much more for their 340B drugs than they should be. But what can be done?
Since 340B is a federal program, it will take Congress to fix it. One bill, the 340B Affording Care for Communities and Ensuring a Strong Safety-Net (340B Access) Act seeks to impose much-needed transparency and accountability into the program.
Congress has a significant opportunity to offer meaningful support to vulnerable communities nationwide by enacting comprehensive reforms, such as those proposed in the Access Act.
The overall goal is to return 340B to a targeted program to ensure that low-income and uninsured patients have access to lower drug prices — not a windfall for hospitals.
It’s a common problem that government programs start small and end big, often losing sight of a program’s original purpose and failing to help the people the program was intended to serve. That’s happened to 340B and it’s time to get back to basics. Texas’ congressional leaders should help lead the way in the coming Congress.