340B and why you should care

At any one time in Washington, D.C. there are thousands of individual battles going on over hundreds of issues large and small. Most of the battles these days seem to form along partisan red and blue lines — but not always.

Recently, a program cryp340Btically named “340B” has become subject of one of those battles.

340B is a government-mandated program that ironically began as a volunteer effort by the drug manufacturers. Back in the early days of the AIDS epidemic emerging new drugs and the “cocktails” used to fight HIV were prohibitively expensive. Many patients were uninsured. So manufacturers began a program of selling such drugs to treat low-income and uninsured patients at deep, deep discounts.

Under Obamacare, though, the program was expanded. According to a recent article in Forbes,

In 2009, Talyst, a consultant to hospitals and contract pharmacies began lobbying for a rapid expansion of the program recognizing, in the words of Talyst, “There is no requirement to pass the savings on to patients directly.” Companies soon discovered it was legal, under certain parameters, to take in drugs at a discounted rate and charge insurers for the full cost of the drugs without passing the discounts on to patients.

This particular battle pits big Pharma and the “medical-industrial complex” of hospitals and chain pharmacies against each other.

Pharmaceutical folks claim that some hospitals are too liberal in their interpretation of eligibility and proper utilization of the 340B category of drugs. Um yeah.

They allege that the program has morphed into a low-cost ATM for large hospitals because Congress failed to nail down exactly what “indigent or uninsured” really meant.  (Congress really should stop outsourcing their jobs to unelected agency rule-writers…..)

The hospitals claim they are in the right and are using the program within the law. They also cite the vagueness of the definitions in the statute as justification. Further, they claim that the use any “profits” from 340B to cover costs for “uncompensated care” – in other words, to balance the books on losses.

Just recently some 500 hospital and health system CEOs signed a joint letter to Congressional leadership calling for preservation of the program, claiming, “In some instances, the program allows us to keep our emergency rooms and hospital doors open.”

Pretty sure the program was not intended to balance the books.

And let me just say right here – again – that “legal” doesn’t necessarily mean “right.

On the other hand, many publications including Forbes and “Managed Care” have hit hospital abuse of the program pretty hard. One publication dubbed 340B as “honest graft” and “…a get-rich-quick scheme helping investors, financial institutions and corporations.”

The Charlotte Observer reported that Duke University Hospital cleared a tidy $69.7 million profit from selling 340B drugs to its patients, 67% of whom were covered by commercial insurance with only 5% totally uninsured. $70 million will keep a lot of “hospital doors open.”

Follow the money. Legal loopholes were found and exploited and now, we have another government mandate where costs exploded 770% in five years.

The real losers here are the truly needy who could benefit from a program like this – and the rest of us who get to pay the costs passed on so hospitals can “cover losses.” And we wonder why we can’t get a handle on healthcare costs…..

Congress is finally taking a look and good for them. Both Democrats and Republicans see problems here. But….well, Congress.

I won’t hold my breath for a speedy resolution.


  1. Hi Holly,
    I am hear in Utah as well. I was the pharmacy director at Utah Valley Regional Medical Center (stepped down 18 months ago to be a full time 340B compliance consultant). This is definitely my area of expertise (I can’t say that about a lot of things, but this one I can). At Utah Valley, we used our 340B program to provide needed medications at no or a very low cost for patients that could not afford their medications. Due to the current cost of some of these drugs, it would have been very difficult to do, and the 340B drug program allowed us to add these types of programs to our already large charity care program and write offs. One of my pharmacy residents did a study and showed we had a statistical decrease in hemoglobin A1C in our diabetes population who entered our 340B voucher program (these patients had a need for financial assistance even though some had insurance, e.g., $500 co-pay/month). In other words, patients clinical condition of diabetes improved when we helped them cover their drug cost through the 340B program. The 340B Program is only eligible to government and non-profit organizations. You can actually see Intermountain’s financials online as it is publicly available when they report their benefit to the community, I think you will find it staggering to see how much is provided in charity care and write off to bad debt. Senator Waxman, in July 2014, was very clear at the summer 340B Coalition conference in Washington DC that the 340B Program was created to help these hospitals and clinics cover the cost of charity care. I know this has not been clear in anti-340B articles, but the senator who was there at the time the legislation was created seems to be a good person to clarify intent. We do need more focus on compliance, and we are seeing that through HRSA. I think it is no mistake that the 340B component of the Cures legislation were removed yesterday. I know this topic is not a widely known area of healthcare, but please take it from someone who has lived it and saw its impact on patients, it is a good program. I am also not sold on the idea that terminating the program, which increases drug manufacturer revenue, would result in lower drug cost. I believe drug manufacturers will charge what the market will bear and the net result would be better financials for stock holders (many of which are based outside of the US). Thank you for bringing up the topic here in Utah. We have many hospitals that utilize the program who are the safety net for our state. -Rob

  2. Roxanne Nevarez says:

    Hey Holly! I just want to add my two cents about this program that is actually really beneficial to both the safety-net providers here in Utah, and to the communities that they serve. The 340B program was created to help safety-net providers (providers that don’t turn patients away regardless of ability to pay). The purpose of the program was not to provide drugs at a discount to these patients, but to provide drugs at a discount to the hospitals that end up writing off those patients as charity. You mention that the truly needy are the losers who could benefit, but don’t. Not true. No, the program was not necessarily intended to balance the books. But I think you could agree that if a tiny rural safety-net provider ended up closing their doors because of net losses, that all patients in the community, vulnerable or not, would suffer. Is this the case for every covered entity? No. But go take a look at Utah Valley Regional Medical Center and their diabetic voucher program that is funded by the savings they receive from the 340B program. Or Primary Children’s Medical Center that will provide medications to their patients at a huge discount when they are unable to afford medications, like they did for an underinsured patient with a $1,200 co-pay that they were able to reduce to $50. 340B program savings are also very influential in the Hemophilia clinic at Intermountain Healthcare. I think that everyone can agree that clearer definitions and stricter oversight are greatly needed in the 340B program. The lack of those at the present moment, however, does not mean that the program isn’t already helping so many people in a really great way. If you would like to see some of these programs in action, we at Intermountain Healthcare would love to get together and give you a tour. Thanks for featuring a 340B-related article!

  3. Jennifer Cook says:

    Hi Holly,
    I wish you would have investigated this topic further before posting this blog article, especially regarding our Utah hospitals. My husband was hospitalized and given a monthly medication that cost around $1500.00. Even with insurance helping we were unable to cover this medication the duration of the regiment. We were given a ‘voucher’ by Intermountain Healthcare that covered my husbands medication and we only paid $50.00. There are honest 340B hospitals in Utah working to improve healthcare in our state. They could use your voice spreading the truth.

  4. Rob, Roxanne and Jennifer: Thanks for weighing in. I hope you see that I never said it should be shut down. I do think the egregious use of this program in ways that were never intended, does in fact harm those it should be serving. If misusing the program causes the program to be shut down, it is harmful to those who do and who could benefit from it. I believe in a safety net. I always have. I’ve seen life without it and no reasonable person would ever want people to live that way.

    Having said that, I do think, as Roxanne rightly points out, there needs to be increased oversight and accountability and that loopholes need to be tightened up. I don’t believe that hospitals should be balancing their budgets on pharmaceutical loopholes. From everything I’ve heard, IHC is doing a great job using this program as it was intended. Not all hospitals are, as I’m sure you know.

    And Roxanne, I will totally take you up on your offer to see some of these programs in action.