What is the 340B Program??!!!

I've been seeing this program floating around in my healthcare subscriptions, and so I decided to do some digging because it's related to pharmaceuticals and pricing, which is a topic I enjoy reading and researching. 

If I were to state the program's purpose in a very simple sentence, I would say that the 340B program was established to provide outpatient drugs for hospitals located in low-income populations. 

  • The program recipients care called "covered entities" and includes six categories of hospitals:
    • Disproportionate share hospitals
    • Children’s hospitals and cancer hospitals exempt from the Medicare prospective payment system
    • Sole community hospitals,
    • Rural referral centers
    • Critical access hospitals
  • There are more details as to what qualifies a hospital as a "covered entity" but just know that these six categories are the most common recipients for this program.
  • There are also eleven categories of non-hospital covered entities that can be eligible for this program, but for this article we'll just focus on the hospitals. 

I'm going to briefly go over the process of how hospitals get these discounts and pass them onto patients, but the majority of this article is going to focus on why this program is being abused. It's quite unfortunate because it is a great program with a great purpose. 

The Process

  1. Entities that think that they qualify for the program can apply online in the first two weeks of any calendar quarter (between the 1st day and 15th day in each month). 
  2. Facilities that are approved will receive the discounts beginning the first day of the next calendar quarter after the calendar quarter in which the entity completed the registration.
    1. EX: Hospital A completed registration in January 14th and was approved. Hospital A can start receiving discounts on February 1st. 
  3. The discounts are not on every drug. They are only available for the eligible drugs. 
  4. Covered entities will then give these discounted drugs to eligible patients. 
    1. An eligible patient must have an est. relationship w/the entity and the entity must have a record of the patient's care
    2. An eligible patient must receive care from a professional employed with the entity.
    3. An eligible patient must receive health services that are consistent with the services for which grant funding has been provided to the entity
      1. In other words, a patient can NOT receive a discounted drug if their only care is getting the drug. There must be other care in the visit as well. 

So why is this program being abused? Well if you read the eligible patient section carefully, you would have noticed that the program did not specify if the patient had to be enrolled in a specific insurance program. That means that patients with private insurance or Medicare can receive these discounted drugs. While this program was meant to target the low-income patients and the uninsured, it seems that there are more people benefiting from the program than they intended to. 

The problem worsens because pharmaceutical companies are giving out discounts, which doesn't help them because they aren't making as much money off these drugs as they used to, and hospitals are able to purchase these drugs for less money while possibly getting reimbursed the same amount if they had purchased these drugs for the usual amount.

  • Let's take a lemonade stand. I will call my stand RST, and RST sells lemonade for $10. Now, the government has created the 340B program and now I have to discount my lemonade for my "covered entities" to the price of $5. Side note: in real life, the drugs are discounted between 25 to 50 percent. 
  • Now instead of making $10/cup of lemonade, I am only making $5/cup of lemonade. While, my "covered entities' are still getting the same benefit, a cup of lemonade, at half the price of what they used to pay.
  • Now, if I am a rational person, then it is logical for me to be upset with this program because I am making less money while my "covered recipients" are getting all the benefits. 

And thus, the 340B program has evolved in a revenue maker with hospitals abusing their power in this program. Pharmaceutical companies say that they will pull out of the program, which will leave many people in danger because they need these drugs to be healthy. Hospitals do not want it either because they need to help their patients, and let's be honest they most likely enjoy making that money. 

How Do We Reform 340B? 

I don't have a clear-cut answer for this, but I do believe that the program's policies should be revised. It has strayed too far away from its original intent to only help needy patients, and so its policies must reflect its true mission. Eligible patients must also be under Medicaid or have no insurance. When we let people with private insurance benefit from a program that is intended to only help the needy, we start to stray away from the original mission. 

However, at the end of the day, the healthcare industry is a business trying to make a profit. And so, it is understandable why hospitals do not want to reform the 340B program, but helping the needy and making a profit are two different things and can not be combined together. 

Share your thoughts down below about what you think of the 340B program? Whose at fault? Pharma? Hospitals? Both? 

For more information about the 340B program, check out this link that I used for this article: https://www.340bhealth.org/340b-resources/340b-program/overview/