Drug Companies and Hospitals Clash over Federal Drug Discount Program

Wednesday, June 25, 2014

Call it a drug war: A battle between hospitals and pharmaceutical companies over a government discount drug program, with claims of profiteering at the expense of the patients the program was designed to help.


Two decades ago, the U.S. government established a special program that allows certain hospitals and medical clinics to purchase expensive pharmaceutical drugs at a discount so they can pass on the savings to patients needing medication. But this effort has come under fire from the drug industry, claiming healthcare providers are taking advantage of the discounts to boost their profits.


Known as the 340B Drug Pricing Program, the government creation makes it possible for thousands of hospitals, community health centers and family planning clinics to buy prescription medications from drug makers for 25% to 50% less.


These facilities then turn around and charge higher rates to patients with insurance, making it possible for them to pocket the difference.


“Everyone sees this as a cash cow,” Maya Bermingham, vice president and senior counsel at the Pharmaceutical Research and Manufacturers of America (PhRMA), the drug industry’s main lobby, told Kaiser Health News. “You can actually make money off of this program and that was not really the intent of the program when it was originally formed.”


Hospitals reject the allegation, particularly because it’s coming from an industry notorious for gouging patients.


“We find it highly ironic that the pharmaceutical industry is talking about cash cows,” Ted Slafsky, president and chief executive officer of Safety Net Hospitals for Pharmaceutical Access, said. “They are the ones who are profiting off of the skyrocketing costs of pharmaceuticals.” Without the savings the program provides, participating hospitals “would have to cut back on vitally important services,” he added.


The Obama administration has said it will intercede in the battle of words by clarifying the program’s rules. However, a recent ruling by a federal district court suggests that it may not have the authority to take such action.


340B has been steadily growing in size over recent years, with drug purchases going from $6 billion in 2011 to $7.5 billion as of last year. This total may soar in just two more years, to $12 billion, according to experts.

-Noel Brinkerhoff


To Learn More:

Drug Discount Policy For Hospitals, Clinics Under Scrutiny (by Mary Agnes Carey, Kaiser Health News)

Drug Discount Program Has Drugmakers Crying Foul (by Kristian Foden-Vencil, Oregon Public Broadcasting)


Geoff Feldesman 4 years ago
For all of the argument, both of these the medical centers and the pharmaceutical manufacturers acknowledge that the federal government should define or re-write the 340B regulations. A recent court judgment had cast doubt on whether the new rules would be released, but the federal Health Resources and Services Administration that manages 340B is actually anticipated to introduce those new rules this month.

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