A federal program designed to allow certain safety net hospitals and clinics听to save money on drug purchases is under fire from critics who say the facilities are using that money to pad profits rather than help patients.
The lets thousands of hospitals, community health centers and family planning听clinics buy听outpatient prescription medications from manufacturers at an estimated 25 to 50 percent discount.听 Participants can then charge higher rates to insured patients and keep the additional revenue.
But growth in the 20-plus year-old program 鈥� sparked in part by the听Affordable Care Act which expanded eligibility听听鈥斕齣s raising alarms among drug makers and some members of Congress.听They听say听that some听facilities should not听be eligible and that the money they receive from the discounts is not always being plowed back into patient care.听Administration officials have promised to propose clearer rules for the program, which had been expected as early as this month, but a recent听federal district court 听has put into question whether they have that authority.
鈥淓veryone sees this as a cash cow,鈥� said Maya Bermingham, vice president and senior counsel at the Pharmaceutical Research and Manufacturers of America (PhRMA), a drug industry trade group.听 鈥淵ou can actually make money off of this program and that was not really the intent of the program when it was originally formed.鈥澨�
Hospitals that benefit from the 340B program are fighting听back.
鈥淲e find it highly ironic that the pharmaceutical industry is talking about cash cows,鈥� said Ted Slafsky, president and听chief executive officer of Safety Net Hospitals for Pharmaceutical Access. 听鈥淭hey are the ones who are profiting off of the skyrocketing costs of pharmaceuticals.鈥� Without the savings the program provides, participating hospitals 鈥渨ould have to cut back on vitally important services,鈥� he said.
Hospitals say those services include specialized clinics, trauma care, burn听units and poison control, as well as deferring some of the cost of uncompensated care. The discounts also allow the facilities to provide drugs at reduced prices or for free to indigent听patients.听About a third of all hospitals participate. According to the American Hospital Association, the program saves hospitals听$1.6听billion to $3.2 billion each year on drug purchases.听
Funding Vital Services
To qualify for the program, hospitals and clinics must meet federal requirements, such as non-profit status, serving a certain percentage of low-income or uninsured patients or receiving federal grants.听 The 2010 Affordable Care Act broadened the type of facilities that can qualify, including critical access hospitals, which are located in rural areas and have no more than 25 inpatient beds.
In 2011, 340B facilities bought about $6 billion worth of drugs through the program and by 2013 that figure had grown to $7.5 billion, according to government figures. Some analysts predict the program could account for $, but hospital groups say those estimates are overblown.
At Mount Sinai Hospital, which serves many low-income neighborhoods in Chicago鈥檚 West Side, the $2 million raised through the 340B program annually helps fund a clinic for patients who have experienced neurological conditions, such as those following a stroke.
鈥淚f we didn鈥檛 have the 340B program we wouldn鈥檛 be able to afford to have that clinic,鈥� said Justin L. Schneider, a vice president at Sinai Health System.
The 340B program brings in about $70 million a year for the Henry Ford Health System in Detroit, funding about a third of the hospital鈥檚 uncompensated care, said Dr. Robert Chapman, who runs Henry Ford鈥檚 cancer institute. Without those funds, Chapman says the medical center would have to cut services. 鈥淚n some ways, I like to think of it as keeping the last straw off the camel鈥檚 back,鈥� he said.
One of the areas coming under close scrutiny at hospitals is chemotherapy. As increasing numbers of oncology practices are absorbed by hospitals, some patient advocates say the they receive but not increasing the amount of uncompensated care they offer.
earlier this year from the Alliance for Integrity and Reform of 340B, which includes PhRMA, drug manufacturers and patient groups, found that charity care represents 1 percent or less of patient costs at approximately one-quarter of 340B hospitals. Slafsky鈥檚 group said the report was based on 鈥渦nreliable estimates of charity care鈥� and that the average 340B hospital provides three times more uncompensated care than non 340B hospitals.
A Question Of Authority
The federal (HRSA)听 runs the 340B program. In 2011, a Government Accountability Office called HRSA鈥檚 oversight of the program 鈥渋nadequate鈥� because it primarily relied on self-policing by the participating entities and drug makers.听 A HRSA spokesman said the agency has taken several steps to address those concerns, including auditing some program participants.
In May the U.S. District Court for the District of Columbia struck down a HRSA regulation governing orphan drug sales under the 340B program and said the agency did not have the authority to issue the regulation.听 The court ruling has 鈥渢hrown into question HRSA鈥檚 ability to issue broad regulations鈥� about the program, said Ellyn L. Sternfield, an attorney with the firm Mintz Levin.听
Despite the ruling, HRSA officials said in a last week they are continuing to move forward. They have not yet said if they will appeal the court鈥檚 decision. PhRMA, which sued to stop the orphan drug rule, said in a statement, 鈥淧hRMA believes HRSA may not issue the orphan drug rule and therefore its web posting regarding the orphan drug exclusion is improper.鈥�
The HRSA proposed regulation has been expected to touch on several key areas including:
鈥斕�Eligible patients: Patients who have a 鈥渞elationship鈥� with a 340B hospital or clinic are eligible to receive the discounted 340b drugs. But exactly what constitutes such a relationship isn鈥檛 clearly defined. 鈥淭here鈥檚 always been a discussion about who truly is a patient of a covered entity and who truly can receive a 340B drug,鈥� said David Ivill, a 340B expert with the law firm McDermott Will & Emery.
鈥斕�Eligible facilities: Currently if a clinic is included in an eligible hospital鈥檚 Medicare cost report it can qualify for 340B drug pricing. Analysts expect a new regulation would provide more clarity on which facilities qualify and which ones don鈥檛. While one part of a qualifying 340B hospital might serve large number of poorer patients, an affiliated clinic could see mostly insured patients. Under current rules both qualify to receive the discounted drugs.
鈥斕�Contract pharmacies:听 Some providers in the 340B program can contract with outside pharmacies, like Walgreens, to give patients the flexibility of filling their prescriptions at locations that may be more convenient than a hospital pharmacy.听 A released in February by the HHS Inspector General found inconsistencies in how some contract pharmacies determine who is eligible for the discounts and in how they conduct the oversight activities that HRSA recommends.听 In a statement, a HRSA spokesman said the agency has followed up individually with pharmacies identified in the report 鈥渢o determine necessary next steps.鈥�