According to drug companies, the little known 340B Drug Pricing Program is giving them a big headache. The program, which drug makers participate in on a voluntary basis, costs taxpayers nothing. Pharmaceutical companies allow healthcare nonprofits to purchase prescription drugs at a discount in exchange for access to the ever-growing Medicaid and Medicare prescription drug markets. That explains why drug makers do not simply exit the program – they are making money hand over fist off a guaranteed payor, the American taxpayer.
Unsatisfied with the current deal, these multibillion-dollar drug companies want to penny-pinch nonprofit providers that have the legal right to discounted prices. To hear it from drug companies, their primary concern involves so-called “bad actors” in the program. Taken at their word, they want reforms that rein-in how large metropolitan hospital systems exploit 340B eligibility. Yet, they offer one size fits all solutions where the byproduct will create healthcare deserts in rural states and force specialty care providers, that treat chronic conditions such as HIV, to close as well.
Here is the real scandal - drug companies undermine the proper functioning of the program and then offer solutions to their manufactured crisis. For many nonprofit safety-net providers, the arsonist has become the firefighter. The problem, however, is that none of the drug company “fixes” benefit safety net providers. To no one’s surprise, drug makers want changes that benefit their balance sheets at the expense of the health outcomes of vulnerable Americans.
In 2020, drug companies began instituting contract pharmacy restrictions, curtailing 340B savings entitled to nonprofit providers. Patients now have fewer places to access prescriptions, all so drug companies reduce their financial exposure. In the end, these companies hope if they put up enough roadblocks, patients will forego filling their prescriptions. More importantly, drug makers are not restricting access to expensive brand name cosmetic drugs or drugs considered quality-of-life treatments. Rather, the restrictions focus on treatments for cancer and auto-immune conditions. In April, pharmaceutical giant AbbVie added Venclexta, an oral therapy for blood cancer to its restriction list that boasts 90 of its products. AbbVie already restricted its best-selling cancer therapeutic, Imbruvica, in 2022. AbbVie is not alone. In May, Bayer added Nubeqa, used to treat pancreatic cancer, to its contract pharmacy exclusion list.
The Health Resources & Services Administration (HRSA), the agency charged with administering 340B, sent letters to each company, now over 30, telling them they are violating program guidelines and the law. In response, pharmaceutical companies filed a host of lawsuits, claiming HRSA lacks the authority to compel delivery of prescription medicines to pharmacies used by 340B nonprofit providers. Drug makers argue that HRSA does not properly oversee the 340B program. Yet, the lawsuits simultaneously allow contract pharmacy restrictions to continue apace and tie the hands of federal regulators. While multiple cases make their way through the judicial system, nonprofit providers have no financial relief from restrictions. 340B nonprofit providers operate on slim margins. Without savings from 340B discount purchases, many will provide fewer essential services or cease operations altogether. Drug makers do not care if they blow a hole in the healthcare safety-net. In fact, they want it to happen. If healthcare nonprofits close, that means fewer providers eligible for discounted drugs, thus more money flows into drug company coffers. If these 340B nonprofit providers shutter, more patients will swell the Medicaid and Medicare rolls underwritten by taxpayers.
Drug makers hope restrictions will batter nonprofit providers into submission, coercing them to accept a legislative fix preferred by the same companies responsible for their current hardship. Extortion tactics may work. The National Association of Community Health Clinics (NACHC) partnered with PhRMA in a bid to protect community health clinics from the financial damage wrought by contract pharmacy restrictions. The results are not promising. Three longtime critics of 340B in the House of Representatives just introduced the 340B ACCESS Act, the brainchild from the strange bedfellows partnership. At best, the legislation offers Potemkin protections.
Drug makers in the midst of breaking the 340B program are promoting legislation that layers duplicative reporting requirements on all providers, not just large metropolitan hospitals. The industry that lobbies Congress every day for light-touch regulations to reduce their operating costs want to bury nonprofit providers under red tape. The ACCESS Act’s provisions for contract pharmacy use a couple onerous requirements on pharmacies with the threat of heavy fines for noncompliance. And that is the ultimate point. Shrink the 340B program by any means necessary.
Drug makers will not stop. Even if their dream legislation becomes law, nothing will satisfy their insatiable appetite for profit. Lawmakers must resist the allure of bromides about “transparency” and “reform” and instead protect 340B from actors determined to dismantle the healthcare delivery program that cares for the most vulnerable Americans.
John Arcano is a policy analyst at AIDS Healthcare Foundation.
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