Drug discount program vital to hospital care

Penalties should be assessed for drug company noncompliance

TO IMPROVE health care for patients, hospitals tailor care delivery to the particular needs of their communities, often by extending services and support into the neighborhoods they serve. But some resources that make these community health initiatives possible are increasingly under threat from drug company restrictions.

The federal drug pricing program known as 340B enables eligible hospitals, health centers, and clinics to purchase outpatient prescription drugs at discounted prices and use the savings to provide more services and treat more patients in need. Without using any taxpayer funding, the program helps safety-net providers like the health system I oversee, UMass Memorial Health in central Massachusetts, stretch its resources for the benefit of people with low incomes and those living in areas where hospital care can be scarce.

Since 2020, a growing group of drugmakers has restricted access to discounts when hospitals partner with community and specialty pharmacies to dispense drugs to their patients. Health care providers work with these partners to reach more patients through neighborhood pharmacies and treat more people living with diseases that require specialized drug therapies. When drug companies cut off or impose barriers to dispensing 340B-purchased drugs this way, hospitals and health systems lose access to those savings.

These drug company actions violate the law and interfere with how Congress designed 340B to work. Safety-net hospitals like ours treat a disproportionate number of patients who struggle to access and afford care, with many patients uninsured or relying on Medicaid or Medicare. Drug savings obtained through 340B are invaluable in helping to offset funding shortfalls that result from low reimbursement rates.

340B furthermore enables health care providers to invest in and expand patient and community benefit programs. Cost savings afforded by the program are often allocated toward offering financial assistance for uninsured and underinsured patients who cannot afford their care, including through free or discounted insulin and other prescription medications. Savings also fund a wide range of community benefit programs focused on improving preventive care, addressing social determinants of health, and reducing racial and ethnic health disparities. For instance, health care providers may use savings to embed pharmacy liaisons in clinics to educate patients about their medication regimens, helping to improve patient outcomes.

Communities with a high proportion of residents who are uninsured, underinsured, and disconnected from primary care services were among those hardest hit by the COVID-19 pandemic. Educational, preventative, and diagnostic programs made possible by 340B savings – such as the pop-up testing sites and mobile clinics that we deployed at UMMH – improved the accessibility of essential health services in underserved neighborhoods, without adding additional strain on hospital facilities.

Safety-net providers typically receive no payment for these important health services, which is why 340B savings are crucial. If drug company restrictions continue, health systems could be forced to scale back or even eliminate such community-focused care and support, particularly as safety-net hospitals across the US face substantial financial challenges. Recent survey data show that hospitals similar to ours are projecting millions or even tens of millions of dollars in annual losses, which harm our ability to provide care to patients in need.

The federal government has ordered drug companies with 340B restrictions to cease their unlawful actions, restore the drug discounts the law requires, and pay back safety-net providers they have overcharged. Drugmakers instead have sued the government to challenge its authority to enforce the law, and the cases are now pending before federal appeals courts.

As those cases proceed, there is more the government can and should do. Federal law authorizes steep penalties against drug companies that intentionally overcharge safety-net providers. A bipartisan group of lawmakers has joined 340B hospitals in urging these penalties to take effect.

There is a great deal at stake for patients throughout the US who need sustained, community-focused care and support from safety-net providers. To continue to ensure our ability to serve these patients in need, we must protect 340B.

Dr. Eric Dickson is president and CEO of UMass Memorial Health and chair of the board of directors for America’s Essential Hospitals.