Children's hospitals lobby for fix to drug discount provision in health reform law

Children's hospitals say the new healthcare reform law inadvertently denies them drug discounts worth millions of dollars a year — and they want lawmakers to fix the problem they created.

Sen. Sherrod Brown (D-Ohio) is gathering signatures in a letter urging Majority Leader Harry Reid (D-Nev.) to make a technical correction to the new law "at the earliest opportunity." The House has already twice passed legislation that would amend the law.

At issue is the drug discount program for hospitals that serve low-income populations, known as 340B. The healthcare reform law enacted in March extends the program to cover more facilities, including free-standing cancer centers, critical access hospitals, rural referral centers and sole community hospitals.

Children's hospitals are also included in that list, but the National Association of Children's Hospitals says that's a mistake: Children's hospitals became eligible to participate in 340B starting in September 2009, months before healthcare reform was signed into law. That's an important distinction because certain drugs are excluded from the discount program for entities that were newly made eligible by the healthcare reform law.

The Reconciliation Act, signed in parallel with healthcare reform, exempts a class of pharmaceuticals known as orphan drugs from the discount program. These are drugs developed to treat rare medical conditions.

Children's hospitals say the orphan drug exemption should not apply to them, because they weren't added by the healthcare reform law.

"Children's hospitals use on a daily basis most of the 347 drugs that have received orphan drug status," Brown writes in the letter, obtained by The Hill. "The hospitals participating in the 340B drug discount program have achieved significant savings. They estimate that those savings would be reduced dramatically with the orphan drug exemption."

NACH says the loss of the orphan drug discount would cut children's hospitals' 340B savings by 50 percent to 90 percent. Without a fix, their only options would be to pay full price for the drugs or leave the 340B program in order to buy the drugs through a group purchasing organization.