The Trump Administration Is Right to Reform 340B
As government grows, so does abuse and cronyism. The 340B drug-pricing program is a textbook example of how insiders, lobbyists, and influence-peddlers high-jacked an obscure provision of law and turned it into a profit-making racket. Now that the Trump administration is trying to reform the program, the K-Street set is coming out in force to defend it.
In 1992, Congress enacted the 340B Drug Discount Program, compelling drug manufacturers to provide certain outpatient drugs to specific health-care organizations at a discounted rate. The program was designed to benefit veterans and their families. However, the Affordable Care Act (ACA) — known as Obamacare — expanded 340B by growing the number (and kind) of facilities eligible to participate in the program. Obamacare distorted 340B into a money-making enterprise that hospitals and Wall Street investors now use to increase profits at the expense of patients.
Since its expansion, the program has grown at a rapid rate, thanks in part to recognition by hospitals and chain drugs stores that they can now profit from the program by arbitraging prescription drugs. The Berkeley Research Group notes that outpatient branded drug sales in the 340B Drug Pricing Program now amount to almost 8 percent of the total market, well up from 5.4 percent in 2012 — with much of the growth fueled by abuse of the program.
Rather than help veterans, the program is being exploited to benefit corporate executives and Wall Street, including investment funds. The scam is simple: Hospitals and drug stores get drugs at the mandated discounted rate and then seek reimbursement from the government at the full cost of the drug.
In 2013, Sen. Chuck Grassley (R-IA) noticed that Walgreens was making a significant amount of money when an analyst predicted the company would walk away with a quarter of a billion dollars in profits from the 340B program. “The intent and design of the program is to help lower outpatient drug prices for the uninsured,” the senator wrote. “It is not intended to subsidize pharmacies that team up with [hospitals] to turn a profit.”
The Trump White House has decided to reform the program. The Center for Medicare and Medicaid Services (CMS) has asked for input on how the program can better serve those in need, including rural hospitals and providers.
In a surprise but pleasant development, cancer doctors have come out in favor of the Trump White House. The Community Oncology Alliance described the reform as a critical step to stop “outrageous hospital abuses of the 340B program.” Ted Okon, executive director of COA, said that “countless studies have shown the enormous and unsustainable growth, low charity care levels, cost to patients and taxpayers, and negative impact on the nation’s cancer care system that the current program is having. We can’t afford to put off fixing the 340B program any longer.”
The 340B program continues to grow outside of its original purpose of helping the poor and uninsured — this is true, despite the promise that the ACA would vastly reduce the numbers of uninsured (and underinsured). Reforming the program will be a major defeat for Washington’s political class. Crony corporatists and their lobbyists have abused 340B to make themselves wealthier. Wealth creation is good, but not when a privileged few leverage government at the expense of patients and taxpayers.
We hear a lot about “draining the swamp,” but we don’t see a lot of action. With 340B reform, our elected officials have an opportunity to put patients over profits. Let’s hope they have the courage to do what’s right and necessary.
Jerry Rogers is the founder of Capitol Allies, an independent, nonpartisan effort that promotes free enterprise. He’s the co-host of The LangerCast on the RELM Network. Twitter: @CapitolAllies