Friday, February 13, 2015

Abuse Of Corrupt, ObamaCare Backed "340B Program" Rampant, Reforms Needed

By Brandon Hall  
(Email him at

The "340B" program, originally enacted in 1992, is a federal government program that is supposed to help Americans most in need with access to vital and sometimes life-saving prescriptions.

"Created toward the end of the presidential administration of George H.W. Bush, the 340B Drug Pricing Program was created to provide discounted pharmaceuticals to the poor, the uninsured and the most vulnerable. Essentially, the program required Medicaid participating drug manufacturers to provide discounted covered outpatient drugs to certain eligible health care entities and those entities could contract with pharmacies to dispense drugs purchased through the program on their behalf.

If the issue were that straightforward it would be one thing, but it’s not. Just because the 340B program was created to provide deeply discounted outpatient drugs with the discount going to the consumer doesn’t mean that is what has been going on all the time."

Sadly, the program has been abused again and again. According to the Charlotte Observer:

 "Last year, Duke University Hospital purchased $65.8 million in drugs through the discount program, which saved $48.3 million. It sold the drugs to patients for $135.5 million, for a profit of $69.7 million. The profit would have been $21.4 million if Duke had not participated."

Iowa Sen. Chuck Grassley said:

“If ‘non-profit’ hospitals are essentially profiting from the 340B program without passing those savings to its patients, then the 340B program is not functioning as intended."

The Observer also noted:

"The number of U.S. hospitals participating in the 340B program has increased dramatically in recent years, from 591 in 2005 to 1,673 last year, according to the GAO. Some drug manufacturers have questioned whether all those hospitals need a discount drug program.

In January, a coalition of pharmaceutical organizations published a study that questioned whether the program actually benefited uninsured, poor patients and pointed out how hospitals profit from insured patients who get no benefit from the program."

Read more here:

Read more here:

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Audits from federal officials show multiple cases of abuse of the program at other hospitals across the country also. (The University of Michigan's hospitals did not have any visible issues.)

This recent headline and story from Forbes kind of says it all.

"Growing Risk Of 340B Drug Changes Means Possible Profits Hit At Walgreens And Others"

 The 340B program was not designed to help Walgreens bottom line-it was designed to save the lives of Americans.

The story says:

"According to the data gathered by Avalere Health, the vast majority of 340B hospitals are providing little charity care. Approximately one-fifth of 340B hospitals provide 80% of all charity care delivered by 340B hospitals, even though those hospitals account for less than half of all 340B hospital beds. Said a different way, 78% of the 340B hospitals provide just 20% of total charity care as outlined by 340B."

Those findings are very similar to an IRS study that found that just 9% of surveyed nonprofit hospitals were responsible for 60% of the community benefit expenditures provided by all of the nonprofit hospitals in the survey.

What is more eyebrow raising is the forecast for 340B drug purchases. Drug purchases through the 340B program will more than double from $6 billion in 2010 to $13.4 billion by 2016, at the same time the share of the population without prescription drug coverage will almost be cut in half."

In conclusion, he writes:

"With more data and reports to be had on the abuses by hospitals and contract pharmacies that are using the 340B program to drive profits instead of passing those savings along to the uninsured and other 340B-eligible patients, the risk to companies like Walgreen and others is that Congress does get its 340B house in order."

What an absolute outrage.

ObamaCare has done nothing to help.

"In 2010, President Obama expanded the program by enabling community health centers to contract with retail pharmacies to distribute drugs with the 340B program discount. According to the Health and Human Services Department inspector general that led to more than 1,000% growth in the number of contract pharmacy arrangements...Walgreens accounts for 45% of all 340B contract pharmacy arrangements."

>>>"So, let’s look at the reality of today’s booming 340B contract pharmacy market:

  • One out of five retail pharmacies is now a contract pharmacy for a 340B entity.
  • Walgreens dominates the market, with nearly 5,400 340B contract pharmacies. Other chains are distant also-rans.
  • While many networks are small, some hospitals now have networks with more than 100 retail pharmacies.
  • Despite being located in densely populated urban areas, some hospitals’ networks extend to  pharmacies that are more than 50 miles away or located in other states.
Clearly, the 340B contract pharmacy market is larger and much more developed than many people believe. At this point, it's not clear that multi-billion dollar health systems' mega-networks, featuring mega-chains, are truly serving the neediest patients in local communities...(I)n the three years since HRSA's notice permitting pharmacy networks, the 340B contract pharmacy market has expanded in ways that no one anticipated. As the data show, hospitals are now building mega-networks that extend far beyond their "community.""
The Office of the Inspector General for the Dept. of Health and Human Services is now stepping up its efforts to hold those who violate provisions of 340B accountable.

According to a popular healthcare blog:

"The OIG will assess the risk of duplicate discounts under 340B-purchased drugs paid through Medicaid managed care organizations and States’ efforts to prevent them. In particular, the OIG will assess whether existing tools and processes to prevent duplicate discounts under the Medicaid fee-for-service program are sufficient under managed care operations. While this review does not focus directly on health centers, as 340B eligible entities the results of the review could impact the way in which health centers account for certain 340B drugs. Further, when combined with the stated intention of the Office of Pharmacy Affairs to conduct an increased number of 340B compliance audits as well as the upcoming direct assessment of health centers’ compliance with 340B requirements (as discussed in the blog from November 5), it is apparent that the 340B program in general will be facing increased scrutiny."

So, what else is next for 340B itself? While much is unknown, it's clear changes are coming.

According to the Michigan Primary Care Association:

"HHS withdrew its proposed “Mega Regs” and the Health Resources and Services Administration (HRSA) posted on its website that in 2015 it plans to issue and accept public comment on proposed guidance that will address key policy issues raised by various stakeholders. HRSA also posted that it is “planning to issue proposed rules pertaining to civil monetary penalties for manufacturers, calculation of the 340B ceiling price, and administration dispute resolution.”
A recent report says:

"Looking ahead, there are a number of unknowns  related to the 340B Program. Pharmaceutical manufacturers and advocacy groups are questioning whether the Program, as currently structured, continues to serve its stated purpose.

In addition, at the same time that HRSA has stepped up its audit activity, HHS’ rule-making authority has been called into question, derailing the much-anticipated Mega Rule."


"Currently, an individual’s insurance
status is not a consideration in determining whether
he or she is an eligible patient. Critics assert that
failure to so limit the definition constitutes diversion
of 340B funds. HRSA may also try to tighten the
definition of a patient by clarifying the language of
the current definition (for example, clarifying what
constitutes “another arrangement” with the hospital).

Another area of scrutiny is the determination of what
entities are eligible to participate in the program. Some
have suggested that hospital eligibility should be more
closely tied to demonstrated community benefit—for
example, as reported in a hospital’s Form 990,
Schedule H, or Medicare cost report worksheet S-10.

Others argue that none of these reports provides a
sufficiently accurate measure of community benefit to
serve as an appropriate gauge for participation, that
the current hospital categories for Covered Entities
are sufficient to identify eligible providers, and that the
Program should be expanded to inpatient services
and additional categories of safety-net hospitals."

The group "Alliance for Integrity and Reform of 340B" wants hospital eligibility for the program to be given a second look. They believe that "the 340B program is critically important to uninsured indigent patients and that attention is needed to address concerns over whether the program has deviated from its original purpose and is leading to unintended consequences for patients
Even an op/ed from former Michigan Congressman Bart Stupak vehemently defending the program admits it needs some changes, saying that "goes without saying."

"Like any other government program, it goes without saying that 340B can be improved. But does it need invasive surgery, as some of its critics recommend? Absolutely not."

Forbes writes that:

"With one out of five retail pharmacies now a contract pharmacy for a 340B entity, any sweeping change or additional safeguards to ensure the benefits of the 340B program reach its intended recipients could change the profit outlook at participating hospitals and contract pharmacy companies like Walgreens, Rite Aid, Wal Mart, and CVS."

Sounds like that is long overdue-it's time to reform the 340B program. It's what's best for Michiganders, and it's what's best for Americans. Crony capitalist legislation pretending to benefit our country's poorest and most vulnerable is being blatantly abused by businesses and big government to the benefit of a select few large companies-it's time to act.


Brandon Hall is a lifelong political nerd from Grand Haven, and is the Managing Editor of West Michigan Politics.
>>>Email him at 


Photo By Darlene Dowling Thompson


  1. There is no such thing as a just way to administer an unjust program. You'll find this to be true of all the altruistic social programs sponsored by government.

  2. There is no such thing as a just way to administer an unjust program. You'll find this to be true of all the altruistic social programs sponsored by government.