Hospitals torn between discounted drugs, insufficient oversight

A government program titled 340B that requires drug companies to give discounts to hospitals who serve people on Medicaid or private insurance is under fire from drug companies. Created in 1992 under then-president George H. W. Bush, its purpose was to stop health care costs from skyrocketing which would cause problems for the government and hospitals.
Through this law, Bush hoped to lower the costs for the government on Medicare patients as well as the strain these patients place on the hospital system. As more people began to join Medicare, the costs have been going up for drug companies.
Drug companies argue that hospitals are taking advantage of this bill in order to make undue amounts of money from drug companies. In this scenario, they say that hospitals are purposely joining together with insurance groups in order to reach a larger audience while still paying bottom dollar for the drugs involved. Through this alleged corruption of the system, hospitals are merely pocketing the revenues rather than using them to cover necessary costs from uninsured individuals.
Adam J. Fein who runs Drug Channel Institutes, a research organization based in the pharmaceutical industry, argues that “the value of hospitals’ uncompensated care has been declining while 340B purchases have been soaring” According to Fein, the rising problem with 340B is that 340B lowered drug prices are now more than 50 percent of all drug purchases but the costs of uninsured patients has gone below 10 percent of a hospital’s total cost. Therefore, these hospitals are making ludicrous amounts of money against the drug companies instead of allowing them to break even.
This battle between hospital and drug company has been happening for many years. As the population gets older and more people get on medicare, the amount of purchases grows. Some hospitals argue that they could not survive without these lowered drug costs. In 2013, Director of Pharmacy at the Columbus Regional Healthcare System, Burnis D. Breland told the New York Times, “If we did not have our 340B program, I seriously doubt we could have our outpatient cancer center”.
These hospitals argue that 340B is extremely important in meeting their financial needs in order to help out their community. Another claim by hospitals is that drug companies are actually part of the problem. Instead of hospitals receiving lower prices that they don’t deserve, drug companies are not going through with their end of the bargain.
According to a federal study in 2011, some drug companies are not providing the maximum refund required and are instead forcing the hospitals to pay more. Ted Slafsky, current leader of 340B Health which helps hospitals apply for the program, stated that, “basically, the pendulum has swung so aggressively towards oversight of the hospitals, with little concern about the drug companies.” According to this statement, the 340B program could potentially be under threat from both sides of the table.
The major way one could potentially lessen the problems with this bill is to give more funds to the government agency in charge of the 340B program. The Health Resources and Services Administration, created in 1982, is the primary government force that is in charge of controlling this gigantic issue. However, the organization only has 1,860 employees and only has an annual budget of $4.4 million.
The problem with this government agency is that there is an overabundance of work for such a small organization. They both file grants by any potential hospital who wants these potential bonuses and are also supposed to watch over both the hospitals and the drug companies over all 50 states. Without sufficient funding or work force, it is almost impossible that they could be the watchdog for such a large industry. In 2013, the HRSA audited a mere 51 hospitals which were the first in the program’s history.
The problem here is dual sided; some hospitals and some drug companies are at fault for breaking the system for their own financial gain. The program does good work where it is truly necessary but without potential oversight, the program will be mired in corruption and illegal activities.
In order to do their job effectively, the HRSA needs more funding in order to enforce this bill fairly as the problems with 340B purchases will continue to expand as the U.S. population continues to grow older.