Aldeen’s Sunday Morning Bathroom Read

Are hospitals gaming the system at the expense of low income patients?

By Doug Aldeen – ERISA Healthcare Attorney and General Counsel

“…340B has been the subject of much debate, with critics pointing to several major deficiencies: Lack of supervision and accountability for such a large program.

Aggressive efforts by hospitals to leverage their 340B status, e.g., by directing patients using high-profit drugs to 340B eligible units, use of satellite offices to increase the reach of 340B units, and use of contract pharmacies to distribute drugs.

The discounts are applied to the institution, not the patient in financial need.

Thus, low-income patients treated outside 340B hospitals do not benefit from the discounts and 340B hospitals obtain discounts on drugs even when treating fully insured patients and obtaining negotiated rates.

Community physicians have noted the institution-wide 340B discount is putting them at a competitive disadvantage.

The availability of transparent hospital prices offers an opportunity to make the debate on 340B hospitals more informed, using actual data on the negotiated prices hospitals charge insurers and patients for the drugs they acquire at discounted prices under the 340B program. 

While there is no requirement for 340B institutions to pass along the discounts they obtain (they may use their obtained discounts to fund operations or programs that benefit the community), it is certainly logical for them to do so. 

At the very least, one would expect a reasonable markup that allows the hospital to retain some of the profits for other programs, but also serves the (presumably lower income) local community interest in (i) obtaining lower cost insurance, as rates are dependent on local medical expenses, including drugs; (ii) paying less out-of-pocket (OOP), as OOP costs are often derived as a percentage of the negotiated hospital rates; and (iii) for those who need to pay cash, obtain their drugs at an affordable rate. In this analysis, we use 340B hospital data obtained as a

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