Hospitals Respond to Congressional Accusations of Abuse of Federal Drug Discount Program

Are safety-net hospitals participating in a federal drug discount program keeping the savings on discount drugs rather than passing them on to the uninsured?

Over the past six months members of the U.S. Congress have been investigating, and last week healthcare providers responded to the charges, arguing that the purpose of the program from the beginning has been to reduce the cost of outpatient drugs to all patients as a way to provide additional financial assistance to safety-net hospitals.

Since last fall several senators and representatives led by Sen. Charles Grassley (R-IA) have been investigating the 340B program administered by the Health Resources and Services Administration (HRSA). Under the program, safety-net hospitals can purchase drugs at a discount. The program came under fire in articles appearing in the The Charlotte (N.C.) Observer and News and Observer newspapers. Those articles prompted Sen. Grassley to send letters to the North Carolina hospitals named in the story and to HRSA.

Last week Safety Net Hospitals for Pharmaceutical Access (SNHPA) responded to the charges, writing that ”340B was always intended to lower the hospital’s cost of outpatient drugs for all its patients, not just those enrolled in Medicaid, and to use the savings to improve or maintain all hospital services needed in the community, not just to provide low-cost drugs. If the use of 340B-discounted drugs were limited based on a patient’s insurance status, 340B savings would be reduced and administrative costs would increase to such a degree that providers would be forced to scale back or terminate important programs benefiting indigent and other needy populations. The Department of Health and Human Services (HHS) has made clear there would be no incentive for facilities to enroll in 340B if they were unable to bill commercial insurers and accrue savings.”

SNHPA goes on to state that the Government Accountability Office (GAO) has investigated the 340B program and found that safety-net providers “can purchase 340B-discounted drugs for all patients eligible under the program regardless of their income or insurance status. The GAO further noted that use of the discount for drugs administered to insured patients gave hospitals the financial ability to serve more patients and provide additional services, consistent with the program’s purpose.”

The newspaper articles failed to mention that HRSA had conducted almost 100 audits of 340B providers, SNHPA wrote. The organization said it supported additional oversight and transparency, and pointed out that “HRSA has never audited a manufacturer. This is alarming in light of the longstanding problem of manufacturers overcharging 340B covered entities. Although manufacturers are authorized to audit covered entities, covered entities have no way of auditing manufacturers.”