One of the most common and false tropes about right-wingers is that they simply do not care about the poor. In reality, most on the Right oppose government funding for charity projects because they’re well aware that the money gets misused, ends up making the problem worse, and rarely meaningfully improves the lives of its targets — if it even makes it to individual citizens to begin with. Such is the case with the 340B Drug Pricing Program.
Most people are probably unaware it even exists, but the 340B drug discount program was designed to reduce drug costs for healthcare providers that serve patients regardless of their ability to pay or insurance by offering them a revenue stream to support their services. The legislation mandates that pharmaceutical companies offer discounts to qualifying safety-net healthcare providers in return for having their medications included under Medicaid and Medicare Part B.
Providers in the 340B program can buy prescription drugs at steep discounts, typically around 50% off the list price. Since these discounted drugs can be used for all patients, providers generate revenue by receiving reimbursements from insurers for the discounted medications. Supposedly, 340B-covered entities benefit from reduced pricing on eligible outpatient medications, allowing them to generate savings. These savings enable 340B hospitals to maintain and enhance access to healthcare services for the patients and communities they support.
But that’s not what’s happening. The number of participating sites increased from 8,100 in 2000 to 50,000 in 2020, with hospitals comprising over 60% of these sites. And those hospitals can generate substantial profits, with a study finding mean estimated earnings of $2.5 million from Medicare Part B alone in 2016. Not only that, but the collective profits of covered entities doubled from $20.2 billion in 2015 to $40.5 billion in 2019.
Look, I’m the most die-hard supporter of capitalism you’ll find. I have zero problem with a company turning profits in the market. But this is coming on the backs of taxpayers, not the market. Those dollars are supposed to be going to charity care, not padding the pockets of “nonprofit” hospitals.
What’s even more concerning is that, since 2004, a disproportionate number of hospitals entering the 340B program have been serving higher-income communities, in contrast to those that joined before 2004. So, is the charity care in the room with us? Because I can’t spot it.
How and why this is happening will be unsurprising to anyone who has been truly paying attention to the government since the age of adulthood. There is little oversight in place for how the covered entities use 340B revenue, making it virtually impossible to assess whether the program benefits low-income and uninsured patients as intended. The program does not even explicitly require hospitals to use savings for charity care or pass discounts on to patients.
It’s so dumb only a politician or bureaucrat could have come up with it.
Audits have shown low levels of compliance with what requirements are placed on the program. Patients are largely unaware when they are included in the program as the hospitals aren’t required to disclose that, so the ability for patients even to report stolen charity is pretty much nonexistent.
Lastly, in usual government-program fashion, it seems this program is not only padding the pockets of hospitals but also funneling corporate welfare to a handful of large corporations.
“Contract” pharmacies dispense discounted medications to patients in exchange for a fee or a share of the 340B revenue generated from the prescriptions. The percentage of U.S. retail pharmacies partnering with covered entities has increased from 1% in 2010 to over 40% by 2022, with major players such as CVS Health, Walgreens, Cigna, UnitedHealth Group, and Walmart accounting for 75% of those relationships.
So basically everyone involved is profiting — except for the poor people this was supposed to help and the other taxpayers who are footing the bill.
Fortunately, there is something that can be done at the state level to get a hold of this problem. State lawmakers, attorneys general, and health officials can establish transparency requirements, charity care standards, accountability, and a clear definition of a 340B patient. They could introduce a mandatory charity care rating system that evaluates hospitals based on how they allocate 340B funds to deliver care to underserved communities and revoke nonprofit status for those delivering charity care beneath the national average.
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Additionally, they could establish clear reporting requirements for hospitals to disclose how much 340B savings are applied toward patient care, with penalties for noncompliance. And lastly, they can enforce patients’ rights by requiring that they be notified when they are marked as a 340B case and be given information on how the program is affecting their care.
The market is a far superior allocator of charity care across all sectors, and ultimately taxpayers should get to keep their money and determine the ways in which they want to use it to help others. Americans are a very generous people, and free market charity care would be free of all of the kinds of corruption listed here. But as we work toward this long-term goal, oversight of government-run charity programs is imperative.
Hannah Cox (@HannahDCox) is the president and co-founder of BASEDPolitics and a fellow for the White Coat Waste Project.