The loopholes of the 340B program

Hospitals are failing to fulfill the promise of the 340B program, which offers discounted drugs to hospitals that treat a large proportion of underinsured and uninsured patients, The Wall Street Journal reported Dec. 20. 

The program has long been controversial as nonprofit organization 340B Health has pointed to 19 drugmakers that have restricted their involvement in the drug pricing program, and hospital pharmacy leaders have said it is part of an unclear revenue cycle. 

Among the 2,600 hospitals that are part of the 340B program, they often shuffle the discounts to well-off locations not part of the program, the Journal found. 

3 things to know: 

1. Hospitals that are part of the program are not required to transfer the discounts they receive from pharmaceutical companies to their patients, insurers or Medicare. They also do not have to report their profits from 340B discounts or spend those earnings to support low-income patients.

Cleveland Clinic's flagship hospital, for example, does not pass on specific drug discounts to patients, though a spokesperson told the Journal it has multiple programs that benefit its community, including many Medicare patients. 

2. The criteria for what qualifies as a rural hospital is murky because if a facility is not in a rural area, a hospital can still be tagged as one if it meets other requirements, including having at least 275 beds. The rural referral centers are buying the program's discounted drugs faster than any other type of 340B hospital, by more than 700 percent over five years, the Journal said. Some of the hospitals defined as rural include Chicago-based Northwestern Memorial Hospital, Boston-based Brigham and Women's Hospital and Cleveland Clinic. 

3. One hospital leader called the program "a tenuous space."

"There are recent changes in the 340B space, which hopefully will reverse some of the financial constraints around reimbursement for hospitals taking care of a disproportionate amount of underserved patients," Steven Allison, PharmD, vice president of pharmacy at Altamonte Springs, Fla.-based AdventHealth, told Becker's in early December. "I hope that gets seen through and the hospitals can continue to provide care to those patients at the appropriate expense mark, but that is a tenuous space. The 340B program is always a concern."

Read the full Journal report here.  

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