Shusterman: Time to reform the 340B drug pricing program

My motto in office is "Common Sense Before Politics." I take this motto to heart. Every day, I work to ensure that politics does not get in the way of good government and its ability to help working people. We have enough of that kind of interference/gridlock in Washington, D.C. these days.

In order to ensure that our government better serves you, my office has been conducting an online survey to find out what issues are most important to you. Not surprisingly, high prescription drug costs are at the top of most people's minds. 

I'm deeply disappointed when we have programs to help those in need that institutions exploit for financial gain. One of the most egregious examples of this exploitation is the 340B Drug Pricing Program, a federal program established with the noble goal of making health care affordable for uninsured and low-income patients seeking care at community health centers and nonprofit hospitals. Drug manufacturers must provide outpatient drugs to qualifying 340B hospitals at drastically discounted prices. Hospitals are then supposed to pass on the savings to low-income and uninsured patients. However, many do not. In fact, a recent national study found that 340B hospitals were less likely to provide charity care (fully or partially discounted care) than the average hospital. And today, more than 45% of all U.S hospitals have 340B designation.

Over the past three decades, the 340B program went from covering 90 charity care hospitals to a whopping 40% of all hospitals, most of which do not provide adequate charity care to patients and instead line their pockets with the savings. In 2014, it was a $5 billion program; it is estimated that it has ballooned to $34 billion.

This is an example of absentee fiscal policy and a dereliction of duty when it comes to safeguards.

Over the last several years, many of these 340B hospitals have found loopholes in the program to take advantage of patients by not passing these discounts on to them. Hospitals are not required to pass on the savings or even report how 340 profits are being used. The combination of increasingly broad eligibility and minimal oversight has left 340B ripe for exploitation. There is virtually no way to know when 340B hospitals are using these profits to fund new construction, pay their CEOs, or invest in research and development instead of going to the program’s intended beneficiaries, medically at-risk Americans.

A recent study released by the nonpartisan Pacific Research Institute's Center for Medical Economics and Innovation compared 340B hospitals to non-340B hospitals across eight different states and found that not only do "nonprofit" 340B hospitals make 37% more in profits compared to the average of all hospitals, but these 340B hospitals that are supposed to provide charity care dedicate 22% less of their net patient revenue to charity care than all hospitals. A New England Journal of Medicine report found that the program "may not elicit the intended responses from hospitals -- such as providing more care to low-income communities, investing in safety-net providers, or reducing health disparities -- and may even have unintended consequences."

This program was supposed to help the poor, underinsured and uninsured but, clearly, it is not. Inadequate oversight and a lack of transparency have allowed this once beneficial program to become a part of our country’s overspending on a floundering health care system.

With these 340B hospitals making more money and giving away less in charity care, the actual cost of the program's lack of regulation, coupled with its unprecedented massive growth, is felt by both uninsured and insured patients across the board.

Individuals like my constituents in Chester County.

According to Government Accountability Office-cited data from the Office of Inspector General, two-thirds of hospitals did not offer the reduced 340B prices to uninsured patients, and hospitals charge uninsured patients up to three times more than what hospitals pay for drugs. And, of course, even insured patients pay more for prescriptions.

According to a 2014 study in the Journal of American Medical Association, drug manufacturers are forced to increase drug prices to offset the discounts given to the exponentially larger 340B program. With a $34 billion budget, the 340B program is now almost as extensive as the Medicaid program's outpatient drug sales, yet lacks the regulatory infrastructure and controls needed to protect it from exploitation.

The 340B program had the intention to assist struggling hospitals that help people in need of care, but it's clear we need reform as soon as possible. The ongoing legal battles and massive expansion of the program have created an urgent need to reform 340B through congressional action. 

Over the years, bipartisan congressional leaders have raised concerns about the program's requirements and how the lack of oversight impacts the program's integrity. Federal leaders must close these loopholes and correct this injustice at once.

Let us use some common sense and reform this program.