Making the rich richer at the expense of the poorest and most vulnerable.
Why was the 340B program created? Nobody’s ever put it better than the Association of American Medical Colleges (AAMC): “Congress created the 340B Drug Pricing Program in 1992 to protect safety-net hospitals [or Disproportionate Share (DSH) Hospitals] from escalating drug prices by allowing them to purchase outpatient drugs at a discount from manufacturers. The program enables eligible hospitals to serve their communities by stretching ‘scarce Federal resources as far as possible, reaching more eligible patients and providing more comprehensive services.’”
As demonstrated in a report commissioned by 340B Health, 340B DSH hospitals provided $41 billion in uncompensated care in 2020 alone. And that’s despite average health system operating margins of -6.1% — a figure more than 74% lower than the -3.5% operating-margin average for 340B DSH hospitals in 2019.
Why the sudden drop in 340B DSH hospital operating margins?
While the Covid pandemic contributed the lion’s share of financial strains placed on 340B DSH hospitals in 2020, that was also the year that drug manufacturers began imposing restrictions on 340B drug discounts through the 340B ESP website.
How serious an impact did manufacturer restrictions have on 340B DSH hospitals? Consider this: In the same year that those hospitals’ margins dropped 74%, operating margins for non-340B hospitals increased more than 20% — from 2.9 percent to 3.5 percent.
Is the 340B program serving its intended mission?
When it comes to uncompensated care, the term Disproportionate Share couldn’t be more accurate. In 2020, the average 340B DSH hospital provided $38 million in uncompensated care — while the average non-340B hospital provided just over $14 million.
Why did the manufacturers impose 340B discount restrictions?
It’s hard to find any explanation more compelling, or accurate, than sheer greed. After all, as reported in a March, 2021 Fact Sheet published by the American Hospital Association, the total value of the 340B program amounts to just 5% of the U.S. drug market. Moreover, even with the quote-unquote “lost revenues” drug manufacturers associate with the program, the industry’s S&P 500 companies generate, on average, nearly double (or 179%) the profit margins of non-pharmaceutical companies on the S&P (13.8% margins vs. 7.7% margins).
How effective have 340B ESP and other restrictions been in enabling drug manufacturers to avoid their legal obligations to 340B-eligible hospitals — while adding to their already overstuffed coffers? In the first year of its alliance with 340B ESP, Merck alone saved $2 billion. Money which could, and would, have been used by eligible hospitals to better serve the most financially-vulnerable patients in their communities.
The good news about 340B ESP, for covered entities
Despite the outrageous demands imposed on eligible entities by 340B ESP and other manufacturer restrictions, ProxsysRx has generated $135 million in 340B savings and revenues for the health systems we serve — most of that since the advent of manufacturer restrictions.
