Friday, April 18, 2014
PLACERVILLE, CALIFORNIA
99 CENTS

My Turn: Abuse of drug discount program corrosive crony capitalism

By
From page A4 | September 11, 2013 | 1 Comment

Federal lawmakers are constantly tinkering with the healthcare market. Often, these invasions have perverse consequences.

Indeed, one federal initiative designed to provide poor Americans with discounted drugs has morphed into an ungainly operation fattening the bottom lines of pharmacies and hospitals.

Enacted in 1992, the “340B” program requires drug companies to provide steep discounts on drugs to qualifying hospitals and clinics. The program was meant to help institutions that serve large numbers of low-income or uninsured Americans.

From the outset, however, 340B has been plagued with problems. And now, it often fails to actually help vulnerable patients.

The first major flaw is the program’s eligibility requirements for healthcare providers. The existing eligibility formula does not measure obviously relevant metrics such as the percentage of uninsured patients a hospital serves or the amount of uncompensated care it provides.

A Government Accountability Office report confirmed that even some hospitals that just “provide a small amount of care to low-income individuals… could claim 340B discounts.” And a study by Avalere Health found that states with fewer uninsured residents actually had higher shares of hospitals taking advantage of 340B.

Second, the program doesn’t require that discounted medications be dispensed only to people who actually need them. As a result, many hospitals are selling drugs they purchased on discount at full price to patients with private insurance coverage.

Finally, the hospitals and pharmacies dispensing these drugs aren’t required to pass the savings onto patients.

As a result of these gaping flaws, a drug program meant to help the uninsured has turned into an arbitrage operation that lets hospitals and retail pharmacies buy billions of dollars’ worth of steeply discounted drugs, bill insurance companies and patients the full retail price, and then pocket the difference.

When Sen. Charles Grassley (R-Iowa) looked into the program, he found that the Duke University Hospital — where only 5 percent of patients were uninsured — was able to leverage the discount program to boost its net income by almost $50 million last year.

“Hospitals are reaping sizable 340B discounts on drugs and then turning around and up-selling them to fully insured patients,” Grassley wrote in a letter to the agency overseeing the 340B program.

340B now represents an unholy alliance between moneyed interests and public regulators. The free market has been undermined. Many low-income patients genuinely in need of help are being left out in the cold. Drug companies are being forced to sell a growing volume of products at severe discount — leaving many with little choice but to make up for those lost revenues by raising prices on other consumers.

Congress and regulators have compounded the problem over the years by repeatedly expanding 340B. Almost one-third of hospitals nationally now participate.

The largest and most troubling expansion came in 2010, when regulators authorized hospitals to contract with an unlimited number of outside pharmacies anywhere in the country to dispense 340B discounted drugs. Previously, hospitals could only use in-house pharmacies or contract with a single pharmacy.

This particular change has led to a dramatic increase in the number of contract pharmacies benefiting from 340B. In 2010, there were just under 4,000. Today, that number has jumped to 30,000 — a 700 percent increase.

Accordingly, the total value of 340B discounts has also exploded and is projected to grow significantly in the coming years.

These expansions are making a bad problem even worse. 340B is too often being abused to bolster hospital profits. Healthcare providers should be competing in a free and open market — not exploiting a well-intentioned program meant to help low-income Americans.

The abuse of 340B represents corrosive crony capitalism at its worst. Lawmakers need to fix this program.

Sally C. Pipes is President, CEO, and Taube Fellow in Health Care Studies at the Pacific Research Institute. Her latest book is The Cure for Obamacare (Encounter 2013).

LEAVE A COMMENT

Discussion | 1 comment

  • cookie65September 11, 2013 - 7:14 am

    Name a single "well-intentioned program meant to help low-income Americans" that has not been exploited, corrupted, abused, over-run with costs, or used as just another excuse to expand government even further. Government is like medicine, the more they give you, the more you need.

    Reply | Report abusive comment
.

News

Woman, dog back from Oso

By Wendy Schultz | From Page: A1, 8 Comments | Gallery

 
Goodbye LUPPU, hello LRPU

By Chris Daley | From Page: A1, 3 Comments

 
Past due state taxes bring arrest

By Cole Mayer | From Page: A1, 8 Comments

 
Sanford trial: Prosecution, defense rest

By Cole Mayer | From Page: A1 | Gallery

 
DA candidate to remain on ballot

By Dawn Hodson | From Page: A9

 
Dog talk with Uncle Matty: Benji and the Bickersons

By Matthew Margolis | From Page: A10

 
CPCSD seat unfilled

By Dawn Hodson | From Page: A14, 1 Comment

Lew Uhler backs Ranalli

By News Release | From Page: A14, 6 Comments

 
.

Letters

Bicycle events and traffic control

By Letters to the Editor | From Page: A7, 5 Comments

 
Evacuation

By Letters to the Editor | From Page: A7, 6 Comments

District 4 candidate

By Letters to the Editor | From Page: A7, 12 Comments

 
Open meetings

By Letters to the Editor | From Page: A7, 5 Comments

Volunteers and homeless camps

By Letters to the Editor | From Page: A7, 25 Comments

 
.

Sports

Jennings wins national title

By Democrat Staff | From Page: A11, 1 Comment | Gallery

 
Savannah Stephens can swing the bat

By Jerry Heinzer | From Page: A11 | Gallery

King of the West roars into Placerville

By Gary Thomas | From Page: A11

 
First and goal: Bunt etiquette

By Mike Bush | From Page: A11

Oak Ridge suffers tough 2-1 setback

By Mike Bush | From Page: A11

 
Roundup: April 17, 2014

By Democrat Staff | From Page: A12 | Gallery

.

Prospecting

Plantastic sale this Saturday

By Dawn Hodson | From Page: B1 | Gallery

 
Spring art brightens government center

By Democrat Staff | From Page: B2 | Gallery

Things to do: April 18, 2014

By Democrat Calendar | From Page: B2

 
Time out: A grand time at Grand China

By Earle Camembert | From Page: B3 | Gallery

Temple Kol Shalom hosts Passover Seder

By News Release | From Page: B3

 
Student art featured for Third Saturday

By News Release | From Page: B3

Promenade in high style

By Historic Old Sacramento | From Page: B4

 
Sac State Presents ‘Gypsy’

By California State Unversity, Sacramento | From Page: B4

Friday nights are engaging at the de Young

By Fine Arts | From Page: B5

 
See what is inside the vault

By Center For Sacramento History | From Page: B6

Eggstravaganza

By Fairytale Town | From Page: B6

 
Hats On For the Kids raises money for children

By Democrat Staff | From Page: B6

Gallery tips a hat to Dr. Seuss

By Democrat Staff | From Page: B7

 
Museum presents ‘Diesel Days’

By California State Railroad Museum | From Page: B7

Engagement: Adam Frega and Wednesday Bienusa

By Democrat Staff | From Page: B8

 
Duty: Air Force Airman Brian Polk

By Democrat Staff | From Page: B8

Cal Stage presents a season of challenging productions

By California Stage | From Page: B8

 
Duty: Army Pfc. Kyle W. Beasy

By Democrat Staff | From Page: B8

KVIE calls for artists

By Kvie | From Page: B9

 
A Couple of Blaguards tell tales

By Harris Center for the Arts | From Page: B9

America’s ClayFest II celebrates a rich history

By Blue Line Arts | From Page: B14

 
Fine Arts Museums feature two shows

By Fine Arts | From Page: B15

See wildflowers on train ride

By Railtown | From Page: B15

 
Easter at Northstar is family friendly

By Northstar California | From Page: B15

.

Essentials

Crime Log: March 28-30

By Cole Mayer | From Page: A2

 
.

Obituaries

Arthur W. Cornell

By Contributor | From Page: A2

 
Frank “Bud” Kraus Jr.

By Contributor | From Page: A2

Roy Cluness Chaix

By Contributor | From Page: A2

 
Frederick Wilbur Heymann

By Contributor | From Page: A2

.

Real Estate

Faster sales with spring staging

By Ken Calhoon | From Page: HS4

 
Coldwell Banker outsells the competition

Press Release | From Page: HS7

Handsome Redmond suits modern families

Press Release | From Page: HS11

 
Growing your own

By Marni Jameson | From Page: HS14

 
Fraud workshop scheduled

Press Release | From Page: HS21

HCD launches assistance program

Press Release | From Page: HS22, 1 Comment

 
EZ Mortgages Inc. opens Placerville office

By News Release | From Page: HS22, 2 Comments

.

Comics

TV Listings

By Contributor | From Page: A13

 
Sudoku

By Contributor | From Page: A13

Speed Bump

By Contributor | From Page: A13

 
Working It Out

By Contributor | From Page: A13

Shoe

By Contributor | From Page: A13

 
Rubes

By Contributor | From Page: A13

Tundra

By Contributor | From Page: A13

 
Horoscope, Sunday, April 20, 2014

By Contributor | From Page: A14

Horoscope, Saturday, April 19, 2014

By Contributor | From Page: A14

 
Horoscope, Friday, April 18, 2104

By Contributor | From Page: A14

New York Times Crossword

By Contributor | From Page: A14

 
.

Home Source

Faster sales with spring staging

By Ken Calhoon | From Page: HS4

Coldwell Banker outsells the competition

Press Release | From Page: HS7

Handsome Redmond suits modern families

Press Release | From Page: HS11

Growing your own

By Marni Jameson | From Page: HS14

Fraud workshop scheduled

Press Release | From Page: HS21

HCD launches assistance program

Press Release | From Page: HS22, 1 Comment

EZ Mortgages Inc. opens Placerville office

By News Release | From Page: HS22, 2 Comments