The pharmaceutical and hospital lobbies are dueling to sway lawmakers pondering changes to a drug discount program for some hospitals.
The stakes are high for what is called the 340B drug discount program. Lawmakers are considering changes to the program that in 2016 gave the hospitals $8 billion in drug discounts, representing about 1.3 percent of total drug spending.
At the crux of the argument is how those discounts are being used. The program requires drugmakers to provide discounts to eligible hospitals, including teaching hospitals, children’s hospitals, facilities that provide charity care, and those that serve rural areas.
Federal data shows that about 40 percent of all hospitals participate in the program.
But drug companies and some lawmakers charge that hospitals are misusing the discounts. An increasing number of hospitals have used savings from the program to pad their bottom lines instead of using the money to improve care for patients, the Pharmaceutical Manufacturers and Researchers of America lobbying group argues.
Hospital groups contend that the hospitals provide better care to low-income patients than those not in the program.
The simmering fight between powerful healthcare lobbies erupted into a full-blown war in recent weeks as Congress ratchets up scrutiny of the program.
Lawmakers pushed for more clarity on the program’s mission, since it has evolved since it was created in 1992.
“There needs to be more clarity about what the program allows and doesn’t allow,” said Sen. Lamar Alexander, R-Tenn., during a hearing last week of the Senate Health, Education, Labor and Pensions Committee on the program.
Sen. Bill Cassidy, R-La., and Reps. Larry Bucshon, R-Ind., and Scott Peters, D-Calif., released legislation last year that would place a two-year moratorium on registering new hospitals and associated sites for the program. It also would include new requirements for participating hospitals to report how they provide care for patients.
“It is important to move beyond rhetoric and anecdote and look at objective facts,” Cassidy said at the Senate hearing.
He cited several studies that showed abuse within the program. He pointed to a recent article in the New England Journal of Medicine that found financial gains from participating hospitals weren’t associated with clear evidence of expanded care or lower mortality of low-income patients. Cassidy also pointed to a report that some hospitals gave savings from the discount to a cosmetic clinic that offered plastic surgery.
Bruce Siegel, the CEO of the hospital trade group America’s Essential Hospitals, said those studies were deeply flawed.
Cassidy responded that there is a “whole stack of evidence” that some hospitals are abusing the system.
Siegel, who opposes changes to the program, said later in the hearing that “our hospitals are excellent stewards of the program.”
PhRMA released a report last week from the consulting firm Milliman that showed hospitals in the program have higher per-patient drug spending than those that are not.
Milliman found that the annual per-patient outpatient drug spending at participating charity care hospitals was nearly three times the amount spent at non-340B charity care hospitals. A patient at a charity care hospital in the program was likely to spend an average $457 on drugs and a non-340B hospital $159, the analysis found.
Milliman speculated that the reason for the higher spending is an incentive to prescribe a more expensive drug to get a higher rebate and then have the patient shoulder the cost.
“Because providers keep the difference between reimbursement amount and the drug’s acquisition cost at the 340B price, there may be financial incentives for participating hospitals to overprescribe or prescribe more expensive medications,” the report said.
The results mirror a 2015 report from the Government Accountability Office that looked at the cost for Medicare drug spending at hospitals in and out of the program.
Milliman’s study looked at the claims for people who get insurance through a commercial insurer.
Hospitals in the program “can and often do charge uninsured patients the full price or sticker price for a medicine even after 340B discounts,” said Lori Reilly, PhRMA’s executive vice president of policy, research, and membership.
Reilly proposed changes to the program that include the patient definition, eligibility criteria for hospitals, and “greater accountability and reporting requirements.”
Hospital groups pushed back on the report, releasing a rebuttal report the next day.
The report from the nonprofit group 340B Health found charity care hospitals in the program give higher levels of care to low-income patients than non-340B hospitals.
The low-income patients that a charity care hospital in the program treats make up an average 42 percent of all patients treated, compared to 27 percent for non-340B hospitals, the analysis found.
“On average, 340B charity care hospitals provide 27.4 percent more unreimbursed and uncompensated care than comparable hospitals,” the report added.
The report was based on surveys of 2,505 hospitals, with 955 charity care hospitals on 340B and 1,505 hospitals that are not.
Sen. Elizabeth Warren, D-Mass., pushed back on the drug industry’s assertion that the program is helping to drive up drug costs prices, pointing out that the overall profits for the pharmaceutical industry reached $775 billion in 2015.
“No matter what denominator you use, it is clear that the total loss to these drug companies is a tiny fraction of the many billions of dollars that they pull down every year in profit,” Warren said at the HELP hearing.
She said the drug industry’s attacks on the program were part of a pattern of shifting the blame on out-of-control drug costs to other stakeholders in the healthcare system.
The battle on Capitol Hill comes after the Trump administration sought to make changes to the program. The Centers for Medicare and Medicaid Services released a new regulation last year that cut Medicare payments to hospitals participating in the drug program.
The cut was of almost 30 percent and took effect in January. Hospital groups sued the Trump administration to try to stop the cuts.
