Pharmaceutical lobby moving to end rural drug discount program

posted at 10:01 am on October 20, 2015 by Jazz Shaw

Mike Flynn at Breitbart picked up a little noticed tidbit on the health care front this weekend which probably deserves a bit more attention. It deals with a rather obscure federal plan known as 340B Drug Pricing Program. Established during the Clinton administration, it requires pharmaceutical companies to make certain critical prescription drugs available at affordable prices in primarily rural, low income areas, most frequently in agriculturally focused regions of the country. This is a requirement the suppliers must meet in order to remain eligible for reimbursements through entitlement programs such as Medicaid.

As Mike explains, this bit of largesse actually represents only a tiny drop in the bucket compared to the total revenue of the pharmaceutical industry.

Drug companies were “encouraged,” as the government would no doubt phrase it, to participate in the program by winning access to other government programs in exchange.

Just over 2,000 hospitals, many in rural areas, participate in the program, but the overall impact of the discounts on big PhRMA are modest. The entire program purchases only around $7 billion worth of discounted drugs a year, around 2 percent of the pharmaceutical industry’s revenues.

As we head into the next election cycle, the pharmaceutical companies have banded together to begin lobbying to downgrade or remove this federal requirement, no doubt hoping to charge full price for all medications even in these more remote areas with lower incomes and limited access to healthcare. They’re doing it through a new group called the Alliance for Integrity and Reform 340B. (You always have to work the word “integrity” in the name of such things.)

“The 340B program has grown tremendously in the past ten years, and it’s concerning to see projections that continue this unsustainable trajectory,” said Stephanie Silverman, spokesperson for AIR 340B, a coalition of patient, clinical and manufacturing interests. “ Some entities use the program responsibly; however, 340B already lacks sufficient oversight for generating profits for well-funded hospitals that don’t primarily serve the uninsured as the program intended. Now is the time to establish needed oversight for the program.”

What’s really interesting in the pitch being made by this “coalition” is the fact that they cite the success of Obamacare as the reason for proposing “needed oversight” of the program. (The phrase needed oversight doesn’t need a lot of translation to see that it means scaling back or curtailing entirely.) The pharmaceutical companies were some of the biggest pitchmen for Obamacare and have profited the most handsomely from it. And now they’re claiming that since so many more people have health insurance there’s clearly not as much need for a bunch of grubby farmers to get a discount on drugs when they fall ill since they can just charge the bill to their insurance anyway.

I’m not generally a huge fan of government entitlement programs to begin with, but this is some pretty cynical maneuvering if you ask me. We’re talking about a tiny slice of the total medical reimbursements going on around the country and they’re going to people who are largely left behind if and when the jobs picture improves in the industrial sector. We certainly have bigger fish to fry on the Obamacare front than this, so perhaps it’s best to leave the 340B program as is for the time being.


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Comments

..Let the taxpayers pick it up – at full price of course..

celt on October 20, 2015 at 10:05 AM

Obamacare was never intended to work. It was designed to fail to be replaced by single payer.

One thing government can do with 100% success is DESIGN something to fail.

ConstantineXI on October 20, 2015 at 10:06 AM

But subsidizing the urban trash is perfectly OK. Because slavery. And derp.

Rix on October 20, 2015 at 10:10 AM

Obama…hmmm…hmmm…hmmmmm!

JugEarsButtHurt on October 20, 2015 at 10:12 AM

Obamacare was never intended to work. It was designed to fail to be replaced by single payer.

One thing government can do with 100% success is DESIGN something to fail.

ConstantineXI on October 20, 2015 at 10:06 AM

Wouldn’t it be the height of irony if one of the obligatory unintended consequences of Obumblecare was that it failed to fail? Nah.

vnvet on October 20, 2015 at 10:14 AM

embarrassing

corona79 on October 20, 2015 at 10:14 AM

The entire program purchases only around $7 billion worth of discounted drugs a year, around 2 percent of the pharmaceutical industry’s revenues.

That is the problem.

In my dictatorship, medicines that treat medical conditions would be capped at a cost of $0.15 per dose. Medicines that cure medical conditions would be available at market price.

Want cures for diseases? Take the profit out of merely “maintaining” them.

Just for reference, Big Pharma has no intention of curing anything. If they did, they’d be out of business in 50 years.

BobMbx on October 20, 2015 at 10:16 AM

It is astonishing to me that a conservative blog is advocating a socialist price control program.

GeorgeStanton on October 20, 2015 at 10:18 AM

It is astonishing to me that a conservative blog is advocating a socialist price control program.

GeorgeStanton on October 20, 2015 at 10:18 AM

Where is this ‘conservative’ blog that you speak of?

faraway on October 20, 2015 at 10:21 AM

It is astonishing to me that a conservative blog is advocating a socialist price control program.

GeorgeStanton on October 20, 2015 at 10:18 AM

It’s another, “Sure we’re conservative, but come on” article.

mankai on October 20, 2015 at 10:27 AM

It is astonishing to me that a conservative blog is advocating a socialist price control program.

GeorgeStanton on October 20, 2015 at 10:18 AM

This blog is conservative in the same sense that John Boehner, Mitch McConnell, and ¡Jeb Bush! are conservative.

ConstantineXI on October 20, 2015 at 10:28 AM

Just for reference, Big Pharma has no intention of curing anything. If they did, they’d be out of business in 50 years.

BobMbx on October 20, 2015 at 10:16 AM

I work for Big Pharma and I approve agree with this message.

Rix on October 20, 2015 at 10:31 AM

It is astonishing to me that a conservative blog is advocating a socialist price control program.

GeorgeStanton on October 20, 2015 at 10:18 AM

Drug price control must, unfortunately, remain in the purview of the state because otherwise, it will become exceedingly profitable to develop and spread diseases for which Big Pharma companies already has a cure.

Rix on October 20, 2015 at 10:33 AM

Well…

This seems a bit different from a direct subsidy too. It’s basically a “if you want government money, you have to do this” deal.

We can debate the wisdom of the requirement. And we can debate the wisdom of the overall intervention.

But this is not the same as a mandate…

If the pharmaceuticals don’t want to do this, then they can just not accept government money.

Sackett on October 20, 2015 at 10:38 AM

Our freedom was forfeited the moment America refused to take up arms in opposition to Obamacare. This Socialist monstrosity was forced on us against out will and we are told by big gov and big pharma that we’ll just have to learn to love it. Why would anyone in the ruling class ever throw away so useful a tool in controlling and pruning the masses? I’m amazed that the people who orchestrated and abetted this giant clusterfark are still walking around free breathing air.

cornbred on October 20, 2015 at 10:40 AM

It is astonishing to me that a conservative blog is advocating a socialist price control program.

GeorgeStanton on October 20, 2015 at 10:18 AM

As a retired couple my wife and I have to be very savy in our consumer skills. One of my medicines my wife needs can run $400 for twenty days at pharmacy A and the same thing run $94 at another. We have zero idea why. Is it that pharmacy A is greedy or is pharmacy B getting special treatment from Uncle Sugar? We dunno, but being on a fixed income we have to make sure we stretch it as far as we can.

I guess what I’m saying is we are trapped between the free market ideals and the need for perks. Yes, we should have planned better, but it is what it is and a lot of Americans are in the same boat. That is the paradox, the difference between ideals and survival.

Limerick on October 20, 2015 at 10:44 AM

Is this the program that resulted in all the grocer pharmacies selling antibiotics and whatever for four bucks? I ask because that didn’t seem particularly rural but the connection is close enough that it made me wonder.

The Schaef on October 20, 2015 at 10:49 AM

There are a number of inaccuracies in this article.

First, the 340B program under Obamacare was re-interpreted from a regulatory perspective (i.e., expanded in meaning) to potentially include almost any hospital pharmacy so long as they treated poor patients. This is currently being litigated, as the pharmaceutical companies apparently did not think they were signing up for this or that the regulation was written as such. Its pretty arcane stuff, but can have pretty substantial financial impacts.

The healthcare industry is filled with a fair number of socialists, but I don’t like the idea of re-interpreted regulations, expanded executive powers, or stealth price controls either.

In fact, I really, really dislike them. So, those who support Obama’s stealth regulatory creeping kudzu approach to socializing industry and crony whateverism (it sure isn’t capitalism), just jump right in and support these beta male underachievers in their quest for power over everything by bureaucracy. I find it repulsive, and want it all repealed. But if you like Obamacare, you are gonna love stealth price controls and unexpected retroactive mandatory discounts! Yee-haw! Can’t wait to see what’s next …

I find it illustrative that pharma companies are slow to figure out that by signing on for government funding of drugs, it comes with some … strings attached, eh? And that regulations are … malleable, to say the least, under Obama and the Democrats?

Let it be lesson to them. Lie down with socialist dogs, catch the worst kind of fleas.

Disclaimer: I don’t work for a big pharma company or a hospital pharmacy or as a lawyer (so my opinion ain’t that expert) or own stock in any of the above, but I do enough work in healthcare and can see what’s going on here.

For those who want to research further, here are a couple links I found quickly:

Its currently playing out in a lawsuit over orphan drugs (http://www.fdalawblog.net/fda_law_blog_hyman_phelps/2015/03/hrsas-340b-orphan-drug-exclusion-rule-is-briefed-for-its-third-judicial-review.html and http://pharmalot.com/pharma-wins-lawsuit-over-orphan-drug-discounts-to-hospitals/) – and reading about the details will put you to sleep. I don’t know it well, but Pharmalot looks like a pharma insider website with a pretty anti-pharma dish up the gossip mindset.

PrincetonAl on October 20, 2015 at 10:49 AM

(You always have to work the word “integrity” in the name of such things.)

Of course,if it was a Democrat program, it would be labeled as “affordable”, even as htey are attempting to make it anything except.

Techster64 on October 20, 2015 at 10:51 AM

It is astonishing to me that a conservative blog is advocating a socialist price control program.

GeorgeStanton on October 20, 2015 at 10:18 AM

So you’re ok with paying interest rates of 80-90%? How about 200%? “Let the market decide”, right? Well, what happens when the market is manipulated via corrupt politicians writing laws in favor of the company with most money to toss around? It is no longer a fair market, and any decision made by the consumer is bounded by the terms of the corruption, not free choice.

So yes, “price control” becomes necessary when the market is artificially controlled for non-market purposes.

BobMbx on October 20, 2015 at 11:06 AM

To a certain extent, “discounts” are a way of bringing bargaining back to a market with nominally flat prices. You charge individuals what they are willing to pay, rather than setting one price for everyone. You make a big profit off of wealthy people that don’t bother to look for the discounts, and a small profit off of the poor people who do.

Count to 10 on October 20, 2015 at 11:10 AM

Jazz Shaw sees whites being gorged in the Heartland, and then rides to their defense – hood and all.

Compromises conservatives principles to protect the chosen few.

It is all so delicious to observe.

We’re talking about a tiny slice of the total medical reimbursements going on around the country and they’re going to people who are largely left behind if and when the jobs picture improves in the industrial sector.

Right, so I guess you are a fan of any kind of welfare assuming that it is a tiny slice compared to X.

antisense on October 20, 2015 at 11:51 AM

Grubby farmers? I hope you choke on your next cheeseburger.

/not really. But DIAF? Maybe.

cptacek on October 20, 2015 at 2:43 PM

Mr. Shaw – Your description of the 340B program is inaccurate and misleading. Where did you get your information? It’s obvious that you didn’t do your homework on this one.

The intentions of the 340B may have originally been good, but like most government interventions into the market, the program has been misused and abused. I agree with the comments asking if you had become a socialist as the 340B program has led to many of the availability problems that plague socialist economies. The price reductions mandated by 340B for generic drugs has made it economically unrewarding for drug companies to keep producing many of these drugs. So, now, even though the price of many of these drugs – including many cancer chemotherapy drugs – is low, the availability is limited. Don’t you read the news????

What the drug companies object to is this:

Abuse #1 – the drug companies are forced to sell their drugs to hospitals at very steep discounts (similar to what the government pays for drugs under its VA and Medicaid contracts) so that hospitals serving a certain proportion of indigent patients can SUPPOSEDLY pass these discounts on to poor patients. What really happens is that hospitals not only charge their usual “high” prices to all of their patients, they also are allowed (under 340B) to buy the drugs they use for rich/insured patients at the low 340B prices. So who does this benefit, the poor or the hospital?

Abuse #2 – many retail pharmacies have climbed into bed with the 340B hospitals so that they can share in the booty and so that the hospital can expand its lucrative 340B theft. The 340B hospital enters into an agreement with the pharmacy so that for certain patients the pharmacy is, in effect, an outpatient wing of the hospital. This allows the hospital to sell its 340B priced drugs thru the pharmacy and rack up additional volume. The pharmacy gets what amounts to a kickback accepting a management fee from the hospital for each patient. Again, who benefits?

Finally, being a rural hospital has nothing to do with being granted 340B status. It has everything to do (essentially) with the percentage of a hospital patients who fall into the Medicaid category. Indeed,the 340B scam is SO lucrative that many hospital are expanding there services that draw in Medicaid patients so that they can become eligible for 340B discounts.

Jazz, when you write crap like this, it destroys your credibility – keep it up.

sixchickensleft on October 20, 2015 at 9:46 PM

Mr. Shaw – Your description of the 340B program is inaccurate and misleading. Where did you get your information? It’s obvious that you didn’t do your homework on this one.

The intentions of the 340B may have originally been good, but like most government interventions into the market, the program has been misused and abused. I agree with the comments asking if you had become a socialist as the 340B program has led to many of the availability problems that plague socialist economies. The price reductions mandated by 340B for generic drugs has made it economically unrewarding for drug companies to keep producing many of these drugs. So, now, even though the price of many of these drugs – including many cancer chemotherapy drugs – is low, the availability is limited. Don’t you read the news????

What the drug companies object to is this:

Abuse #1 – the drug companies are forced to sell their drugs to hospitals at very steep discounts (similar to what the government pays for drugs under its VA and Medicaid contracts) so that hospitals serving a certain proportion of indigent patients can SUPPOSEDLY pass these discounts on to poor patients. What really happens is that hospitals not only charge their usual “high” prices to all of their patients, they also are allowed (under 340B) to buy the drugs they use for rich/insured patients at the low 340B prices. So who does this benefit, the poor or the hospital?

Abuse #2 – many retail pharmacies have climbed into bed with the 340B hospitals so that they can share in the booty and so that the hospital can expand its lucrative 340B theft. The 340B hospital enters into an agreement with the pharmacy so that for certain patients the pharmacy is, in effect, an outpatient wing of the hospital. This allows the hospital to sell its 340B priced drugs thru the pharmacy and rack up additional volume. The pharmacy gets what amounts to a kickback accepting a management fee from the hospital for each patient. Again, who benefits?

Finally, being a rural hospital has nothing to do with being granted 340B status. It has everything to do (essentially) with the percentage of a hospital patients who fall into the Medicaid category. Indeed,the 340B scam is SO lucrative that many hospital are expanding there services that draw in Medicaid patients so that they can become eligible for 340B discounts.

Addendum – I just read Mike Flynn’s article – you distorted the hell out of it and are in true need of some reading comprehension lessons. What public school did you attend?

sixchickensleft on October 20, 2015 at 9:57 PM