Dan Crippen was the director of the Congressional Price range Workplace from 1999 to 2003.
In its first report on the 340B drug low cost program’s impact on the funds, the Congressional Price range Workplace revealed {that a} beforehand obscure federal program initially meant to assist a number of dozen safety-net hospitals has exploded right into a multibillion-dollar subsidy for hundreds of nonprofit hospitals, driving up healthcare prices for sufferers — burdening taxpayers and contributing to the federal deficit — whereas delivering little measurable profit to sufferers in want.
The excellent news is that Congress is already working to unravel the issue, and within the course of can considerably scale back the deficit.
As a former CBO director, I’ve seen how federal applications can balloon when well-meaning insurance policies are left unchecked. And that is precisely what has occurred to the 340B Drug Pricing Program that Congress created in 1992 to assist safety-net hospitals and clinics serve low-income and uninsured sufferers.
This system permits qualifying hospitals and clinics to purchase prescribed drugs at steep reductions that producers are required, by legislation, to supply. The concept was easy: Hospitals would use the financial savings to develop care to indigent sufferers.
However in apply, this system has developed into one thing very totally different — and much more expensive. As we speak, 340B discounted medicine might be offered to any out-patient (together with commercially insured) for any value.
Latest CBO evaluation reveals that 340B spending rose from $6.6 billion in 2010 to practically $70 billion in 2023. Throughout that very same time, brand-name drug spending throughout the remainder of the market grew at simply 4% per yr.
So what’s driving the surge? CBO identifies a number of culprits.
First, the report factors to hospital consolidation. Between 2013 and 2021, the variety of off-site outpatient clinics enrolled in 340B grew from about 6,100 to almost 28,000. These “baby websites” let hospital methods pull in additional prescriptions underneath this system — even when these websites serve commercially insured sufferers in higher-income neighborhoods.
Second, contract pharmacies — retail drugstores that dispense 340B medicines — are fueling the livid tempo of progress. CBO discovered that 340B purchases made at contract pharmacies grew at a median of 34% per yr from 2010 to 2021 to over 30,000 pharmacies — practically 60% of all eligible pharmacies. Altogether, practically 20% of this system’s complete spending progress now comes from discounted medicine distributed by these pharmacies. The issue is the financial savings from these medicine do not attain many sufferers, who nonetheless pay their full copay on the counter, whereas hospitals seize the low cost as revenue.
Third, and most significantly, this system’s incentives are the wrong way up. As a result of hospitals can pocket the distinction between the discounted 340B value and the insurer’s reimbursement, they’re financially rewarded for prescribing higher-priced medicine. CBO places it bluntly: These incentives “result in larger costs or an elevated use of medicine and different well being care companies” — and that interprets to larger federal spending throughout Medicare, Medicaid, and personal plans whereas costing taxpayers billions.
And this system nonetheless lacks primary transparency. There isn’t any requirement that hospitals cross financial savings on to sufferers. No mandate to reinvest the windfall in charity care. No clear definition of who truly qualifies as a 340B affected person. And no significant reporting of the place the subsidies go.
This sort of structural failure is fixable — however provided that Congress intervenes. There’s at the moment pending laws that may restore integrity to this system with out undermining its unique mission. And given CBO’s report, it might save the federal authorities cash.
The weather of the laws would lastly set up a affected person definition in statute, assure that low-income sufferers obtain the advantage of discounted medicine, rein in contract pharmacy abuse, and require hospitals to indicate how they’re spending 340B {dollars}. These are common sense steps to convey accountability to a program that is strayed from its unique function.
The CBO has now performed what each Congress and the Government have averted for years: evaluated the scale, scope, and penalties of a program lengthy overdue for reform. With this report in hand, Congress has no excuse to look the opposite approach. If its aim is to decrease healthcare spending and improve tax income, decreasing 340B subsidies matches the invoice.
