NJBiz: 340B Reform Needed

By Jeanette Hoffman, Patients Come First New Jersey’s Executive Director

Almost everyone in New Jersey agrees that health care costs are too high, particularly for low-income families and seniors. However, there is a massive federal program, called 340B, to help the most vulnerable get access to discounted drugs. Yet because this policy is being abused by some large health systems, many patients never actually receive tangible benefits or drug discounts from this program.

Indeed, the 340B program is the second largest prescription drug program administered by the federal government — larger than Medicare Part D, Part B, or Medicaid. It was intended to help the most vulnerable get access to medicines and care by providing covered entities, such as safety-net hospitals, with discounted drugs. However, due to the program’s lack of transparency and oversight, large players in the health care system are taking advantage of deeply discounted medicines to make a profit at the expense of the patients most in need. In fact, these bad actors buy discounted prescription drugs, meant for low-income patients, and then turn around and bill other patients and insurance companies at much higher prices, pocketing the difference.

According to a study by the New England Journal of Medicine, there’s little to no evidence that any financial relief from this program ends up in patients’ hands. The report concluded that “financial gains for hospitals have not been associated with clear evidence of expanded care or lower mortality among low-income patients.” However, there are plenty of examples of hospitals using the profits to improve their facilities or invest in unrelated programs.

In Richmond, Va., a major nonprofit health system was charged with taking advantage of the poverty of Richmond Community Hospital’s patients to profit from deeply discounted drugs through the 340B program, according to a New York Times investigative report.

According to interviews with more than 20 former executives, doctors and nurses, the health system was slashing services at its safety-net hospital, Richmond Community, while investing in the city’s wealthier neighborhoods, using profits made from discounted drugs through the 340B program.

“[The hospital owner] was basically laundering money through this poor hospital to its wealthy outposts,” said Dr. Lucas English, who worked in Richmond Community’s emergency department until 2018. “It was all about profits.”

While well-intentioned, the biggest flaw in the 340B program is that the discounts don’t have to go to the beneficiaries for which they are intended. As a result, some hospitals are reselling and marking up discounted drugs to patients and insurance companies.

Read the full LTE in NJBiz here.