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Tackling the high price of medications in PA: Why target 340B, a program for vulnerable patients and hospitals?

August 11, 2017 | By: Jolene Calla, Vice President, Health Care Finance & Insurance

Tackling the high price of medications in PA:  Why target 340B, a program for vulnerable patients and hospitals?

Pennsylvanians, like all Americans, are concerned about how much they pay for prescription drugs.

Depending on your health and your insurance, your monthly prescription bill can range from a modest $10 for blood pressure pills to nearly $1,200 to treat hepatitis C.

Taking the right medication in the right way is crucial to the health of many Americans. About half of us take prescription medications of some kind. But how are we to take our medications if we cannot afford to pay for them?

Nearly one in ten adults in the U.S. say they delay or forgo their prescription due to cost. Imagine the challenges for those of us with lower incomes or poorer health.

The 340B Drug Pricing Program helps patients in need. How?

Right now, the 340B program requires pharmaceutical companies to give safety-net hospitals discounts on IV medications and other prescription medications taken in outpatient settings.

Hospitals use the savings from these discounts to:

  • Give free or discounted medications to patients who qualify for financial help
  • Cut down on hospitalizations, by teaching patients about their chronic diseases and how to take prescription medications to improve or maintain their health
  • Stretch hospital resources, by providing additional services that help vulnerable patients and communities overcome “social determinants of health” such as low education levels or lack of healthy food

Specifically, the 340B program is open to nonprofit hospitals that:

  • Care for large numbers of uninsured and underinsured patients
  • Are located in remote rural areas
  • Serve only children or cancer patients

340B at work in two Philadelphia hospitals

Mercy Fitzgerald and Mercy Philadelphia serve distressed inner-city and suburban communities, where at least half the families live in poverty and experience significant socioeconomic barriers to care.

These hospitals provide crucial health care services while balancing their books on razor-thin margins.

The 340B program saves these hospitals about $9 million a year. Mercy Fitzgerald and Mercy Philadelphia rely on these savings to provide at-risk patients and communities with:

  • “Starter” prescription medications for all patients, regardless of whether they have insurance, when they leave the hospital, so that patients go home with their prescriptions filled, eliminating transportation and financial barriers that can compromise health
  • Education designed to help patients avoid and better manage chronic diseases
  • Access to programs that help underinsured patients

3 reasons to continue—not stop—340B drug pricing discounts

The federal government has put forth plans to virtually eliminate the drug discounts that make the 340B program beneficial.

In this age of rising prescription costs and modest wage increases for most Pennsylvanians, the 340B program’s drug pricing discounts are needed now more than ever. Here are three reasons why.

  1. Prescription drug costs are rising …

What Pennsylvania’s patients, hospitals, and health insurers spend on prescription medications continues to rise for many reasons, including:

  • Exciting new drug therapies that, unfortunately, are also very expensive
  • More people now have health insurance, which means that more people are learning that they need prescription medications
  • Some pharmaceutical pricing strategies, such as high price tags for prescription medications with expired patents but no competition from generics because they are “sole sourced” (made by only one pharmaceutical company)

According to the Campaign for Sustainable Rx Pricing, prescription drug prices have already risen more than 7 percent since last year.

  1. Reducing 340B drug discounts hurts vulnerable patients and their hospitals the most …

One in five Pennsylvania hospitals rely on discounts from the 340B Drug Pricing Program.

These hospitals serve at-risk, vulnerable patients and communities in both rural and urban settings. The split is roughly 50:50 (half rural, half urban).

These “340B hospitals” face big challenges as they work to stretch scarce resources as far as they can to help patients in need. To understand why 340B discounts are so important, consider that:

  • About 30 percent of Pennsylvania’s 340B hospitals were in the red (negative total margins) for 2016.
  • As a group, these hospitals had a median 3-year average total margin of just 2.31 percent. That’s far below the 4-6 percent margins needed to sustain ongoing health care services and operations
  1. Pharmaceuticals (not taxpayers) pay for the program.

Pharmaceutical companies support the 340B program by selling prescription drugs to 340B hospitals at discounted prices.

A government agency, the Office of Pharmacy Affairs, receives a small amount of federal funding to administer the 340B program.

Studies have shown that the 340B program is sustainable for pharmaceuticals. During 2015, Americans spent $457 billion on prescription drugs. The 340B program accounts for only 2.8 percent ($12.8 billion) of this spending.

PA hospitals say:  “Protect 340B drug discounts. Take a commonsense approach to fostering accountability.”

A recent proposal by the federal government would reduce 340B drug discounts. The U.S. Congress is also looking at policy that would greatly restrict the benefits of the program.

Pennsylvania hospitals urge federal policymakers to protect 340B discounts and savings. These are crucial to helping vulnerable, at-risk patients and their hospitals.

But Pennsylvania hospitals are ready to discuss practical, commonsense approaches to fostering transparency and accountability. Annual recertification and audits are already required.

On behalf of the Pennsylvania hospitals I serve, I have a request.

Please refrain from saddling hospitals with more red tape, regulations, and burdensome paperwork—be it real or digital.  In my view, health care already has plenty of those.

Jolene Calla
Written by Jolene Calla

Jolene Calla serves as the vice president of health care finance and insurance for The Hospital and Healthsystem Association of Pennsylvania.  In this role, Jolene directs all activities related to health care finance, including Medicare, Medicaid, and other government reimbursement for health care providers. 




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