Don’t be penny wise, pound foolish with 340B drug pricing program

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Like many of my fellow Republicans, I welcome the re-examinations of policy the Trump administration is bringing to Washington. As a physician, I especially appreciate the vocal recognition by the president that for many Americans, the prices of prescription drugs are simply too high.

As a former member of Congress, I agree with those who also say we must ensure pharmaceutical companies can and will continue to pioneer the development of new drugs to help improve the health and well-being of Americans with serious, life-threatening, chronic, and disabling conditions.

{mosads}As a conservative Republican, however, I have to call the administration’s position on the 340B Drug Pricing Program the equivalent of an own goal in soccer. Significant payment cuts instituted in January of this year by the Centers for Medicare and Medicaid Services (CMS) threaten to restrict much-needed care for low-income patients in ways that likely will add new costs to our entitlement programs and grow our ballooning deficit.


The 340B program was passed by a broad, bipartisan majority and signed into law by President George H.W. Bush in 1992. It requires drug manufacturers to sell outpatient drugs at a discount to hospitals, clinics, and health centers that serve high numbers of people with low incomes — a private sector approach with no federal money required.

Critics of the program say it raises drug prices, and that 340B providers don’t use their savings to help low-income, uninsured, or underinsured individuals. These assertions are wrong.

Unfortunately, the Trump administration bought this line and ordered the CMS to reduce 2018 payments to 340B hospitals by nearly 30 percent. This has deprived these safety net providers of $1.6 billion in drug discounts, while undermining the will of Congress and existing Medicare law.

I’m also concerned that some proposed legislative reforms could inflict fresh injury by imposing inappropriate restrictions and costly, burdensome reporting requirements that are misaligned with the actual work being done by these providers.  The administration and my GOP colleagues in Congress have vowed to reduce regulatory burden, not add to it.

The discounts that the 340B program provides to patients represent $6.1 billion out of a $457 billion drug market, or just 1.3 percent of total U.S. drug sales. You do the math —$6 billion in savings and $26 billion in care, or a four-to-one ratio.

Congress intended that 340B providers be able to use their savings to stretch scarce resources to reach more eligible patients and provide more comprehensive services.  Some legislators assume that only services provided under a hospital’s “charity care” program meet this requirement. This is inaccurate and misguided.

I find it impossible to ignore the full array of patient-centered services being offered by 340B providers, who are on the front line of managing chronic diseases and conditions that cost our health system the most.  

340B discounts not only support the provision of direct charity care to patients but also allows for outreach programs that ensure children in low-income communities see a primary care provider, diabetes patients are getting and appropriately taking their insulin, a patient with co-morbid health conditions has access to their medications and medication management support services, avoiding unnecessary readmission to the hospital.  

These are just a few examples of how patients and communities benefit directly from the 340B program and how the program saves money for our broader health-care system.

Any doctor will tell you that economizing is penny-wise, pound foolish — certain to result in future visits to the emergency room and expensive treatments for preventable health crises. And who will pick up the tab for those outcomes?

The taxpayer.

340B is a modest program that devotes a tiny fraction of the national drug market to keeping low-income, medically fragile people healthy, with an open-ended commitment by the taxpayer to finance the inevitable and tragic results. As a fiscal conservative, this is my kind of program — one that leverages the private sector to benefit patients and families, without cost to the government.

Like any program, 340B can undoubtedly be strengthened and improved upon through bipartisan dialogue and thoughtful policymaking and compromise.

But the current meat-axe approach, compounded by proposals to limit a successful program and impose new bureaucracy that threaten patient health and access to care, would be a recipe for tragedy — hardly the principles one should expect of a Republican administration and Congress.

Philip Gingrey, M.D., is a former U.S. Congressman who served Georgia’s 11th Congressional district from 2003 to 2015. He is currently a senior adviser with the District Policy Group at Drinker Biddle & Reath LLP. He represents many clients, including individual health and hospital systems and 340B Health, a non-profit organization of more than 1,300 hospitals.

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