hhAccording to a report from the inspector general at the federal Department of Health and Human Services, many hospitals are taking advantage of programs designed to help the poor. The hospitals are profiting hundreds of millions of dollars in ill-gotten gains every single year by exploiting a federal health care program that supplies discounted drugs. The program, 340B, requires pharmaceutical companies to supply numerous health care facilities with discounted drugs in order to help serve low-income patients.

One major flaw with the system is that the 340B provides lax eligibility requirements. What the hospitals are doing is essentially using the program to purchase discounted drugs, then the health care facilities turn around and sell them at full price to insured customers and those who can afford to pay. The hospitals and pharmacies are then pocketing the difference. Other legislative efforts to expand the 340B program have only worsened the problem and expanded the pool of providers that would be able to gain access to the program discounts.

Participation with the program has skyrocketed, the number of pharmacies and hospital facilities that wanted to take part increased by 183% between 2005 and 2013. Contract-pharmacy arrangements have also increased by roughly 700%, and currently roughly 30,000 pharmacies are able to take advantage of the 340B program and purchase discounted drugs.

hh7Sen. Charles Grassley, R-Iowa has previously stated that the program’s main goal of serving the poor is undermined because the hospitals have the option to choose to sell all of their 340B drugs to only fully insured patients while not passing any of the deeply discounted prices to the uninsured. An investigation conducted by the Raleigh, N.C.-based News & Observer newspaper found that several large local hospitals were seriously abusing 340B by selling chemotherapy drugs discounted by 20% to 50% at up to 10 times the cost.

“Industry-watchers expect to see future implementation of restrictions and guidelines designed to prevent these and other discrepancies observed by the OIG.” – Ned Milenkovich, PharmD, JD

Unfortunately, in contradiction to its own objective, the 340B program does not specifically require hospitals to provide discounted medications to patients in need. Only outpatients are eligible to receive prescription drugs at 340B prices because the program is designed as an outpatient program. Many suggest that increased monitoring, compliance, and consistency of application will be necessary in order to limit the program abuse. Currently, many 340B program audits are on the rise and underway at several hospitals throughout the United States. In the end, it doesn’t appear that the 340B program is doing what it was first marketed as intending to do, which was to help those uninsured and financially vulnerable patients. Very little of the savings on the drugs is being passed on to them.