An HHS decision delaying the 340B drug program could have consequences in 2018

posted at 5:31 pm on March 18, 2017 by Jazz Shaw

There’s been some chatter this week about how the House Republicans’ Obamacare repeal and replace package (AHCA) could deliver some bad news for large swaths of Trump voters in terms of health care costs. This would apply in particular to many of the less well-off, working-class folks living in exurban and rural areas of the country. (Wall Street Journal)

Among people who currently have ACA benchmark plans, Oliver Wyman found those who are older and have lower incomes would generally see their costs for similar coverage increase the most under the House bill. Some with higher wages, and certain younger consumers, would likely do better financially under the new regime. Both urban and rural 35-year-olds making about $54,000 a year, for instance, could on average save roughly $3,000 annually, the analysis showed.

In 2020, the House legislation would completely revamp the federal subsidies that currently help lower-income people afford insurance on the exchanges — replacing them with flat-sum tax credits instead. While the ACA subsidies are pegged to a person’s income and the costs of health plans in the geographic area where the recipient lives, the tax credits are based on age, with income limits.

The Oliver Wyman analysis highlights how rural areas, where individual insurance premiums are often higher, could see a major effect from the shift to flat-sum tax credits. Compounding that, rural populations are often older and poorer, so the proportion of those doing worse under the new subsidy setup may be higher.

While the general debate over this (as well as what the House GOP can do to better meet the needs of seniors on fixed incomes) has gotten lots of attention, a decision by the Department of Health and Human Services that could also really impact these consumers has largely gone unnoticed. It’s a choice to delay implementing a rule that will keep drug prices down, specifically for poorer Americans, which also particularly benefit people like cancer patients in rural, politically “red” areas (read: Republicans and Trump voters).

The rule in question relates to the 340B drug discount program, which I’ve written about before and which essentially says that if pharmaceutical companies are going to profit off of entitlement programs, they have to make drugs available to poorer people at a discount. Zero taxpayer dollars are involved; this is literally a program that’s getting people in places like Appalachia or Northern Wisconsin their cancer drugs at cheaper prices. You can do the math on that one, both politically and in terms of the family budget.

The rule would specify how the “ceiling,” or highest price, should be calculated for drugs being discounted via the 340B program, and make sure that pharmaceutical companies weren’t overcharging. Technically it’s only being delayed until May 22, but critics of the pharmaceutical industry and its policies regarding the pricing of drugs are concerned that “delay” may be a euphemism for something more like “canceled” if the date keeps getting pushed out. This could be translated into an opposition message that the Trump administration isn’t really committed to bringing drug prices down, even though that was a major theme that he campaigned on.

Whether they’re right or wrong, the delay is strange and hands easy fodder to the president’s critics. Trump has shown himself to be nearly as critical of Big Pharma as the people who elected him, arguing for Medicare negotiating prices with pharmaceutical companies directly, prescription drug re-importation, and similar reforms. Tom Price, the new HHS Secretary, is reportedly a big proponent of the 340B program who found it immensely valuable to patients as a physician. And as I mentioned above, there are political reasons why not protecting 340B could be a huge problem for the GOP further down the line. House Republicans don’t always have their finger on the pulse of the public when it come to policy, but Trump knows his own base pretty well.

People on both sides of the debate will be marking their calendars for a date coming two months from now to see whether this is a “delay” or an abandonment. But if it’s the latter you can expect to see Democrats running in Rustbelt states or Appalachia making an issue of this in 2018. It may not sound like much, but the issue of high drug pricing makes for great advertisements targeting seniors who reliably show up in midterm elections. This would be a bad issue to screw up on coming out of the gate.


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