Discount program robs pharma to pay hospitals, report claims

NYT: Trade group paper takes issue with 340B as Republicans investigate
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Are hospitals profiting off drug discounts meant to help the needy? The 340B program, mandated in 1992 to aid hospitals and clinics that treat low-income and uninsured patients, is now being used to treat patients covered by Medicare and private insurance, The New York Times says--and hospitals are pocketing the spread.

Apparently, the 340B program was smaller and more manageable a decade ago. But the number of hospitals subject to the discounts has now tripled since 2005. Now, some $6.9 billion worth of drugs fall under the program every year. That cuts into pharma sales by hundreds of millions, the NYT points out. And a new report from the industry estimates 340B could grow to $12 billion by 2016.

So, drugmakers are fighting back, partly via that new report, which questions hospital eligibility and calls for more oversight. The federal government has begun auditing hospitals that participate--and kicked 271 treatment sites off the 340B list last year--but some drugmakers say they're going to start their own audits.

Roche's ($RHHBY) Genentech unit, which markets several broadly used cancer treatments, is one of them. Understandably so, because oncology drugs are among the most commonly discounted in the 340B program. "It's the loophole that's made cancer drugs profitable again," Dr. Peter B. Bach, director of the Center for Health Policy and Outcomes at Memorial Sloan-Kettering Cancer Center, told the newspaper.

Meanwhile, congressional Republicans are investigating, the NYT says. "If 'nonprofit' hospitals are essentially profiting from the 340B program without passing those savings to its patients, then the 340B program is not functioning as intended," Sen. Charles Grassley wrote in letters sent to three medical centers that participate.

Hospitals say the program wasn't meant to simply provide drugs to patients, but to support facilities in a broader way, the NYT says. And a trade group says pharma companies should be audited, too, because some aren't providing the full discounts required.

- read the NYT story (sub. req.)

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