In 1992, the federal government told drug manufacturers they had to give steep discounts to hospitals that treat a large percentage of poor patients.
David Chance recuperates at Oregon Health and Science University. (Photo by Kristian Foden-Vencil/Oregon Public Broadcasting)
The law got bipartisan support and it was a boon for and the federal government. In the decades that followed, the drug discount program has grown in leaps and bounds. But this spring as the feds have been drawing up new rules for the program, a pitched battle has broken out between hospitals and drug manufacturers who say the program, known as , is now bloated and badly regulated.
The drugmakers say the law is meant to benefit patients like David Chance. He turned up at Oregon Health and Science University Hospital in Portland a few weeks ago saying it was hard to breathe every time he laid down.
鈥淭hey put a catheter in the vein in my leg that goes up to my heart, injected some dye so they could see the circulation around and in the vessels around the heart,鈥� he says.
Chance has an enlarged heart and a valve that doesn鈥檛 close properly. 鈥淚鈥檒l be changing my diet and on prescriptions for a little while,鈥� he says.
Those prescriptions include a statin and a blood thinner that cost about $125 a month. Chance works at a Portland area call center and doesn鈥檛 have health insurance, so OHSU is using its聽340B聽funds to give Chance his first month of medicine free of charge.
鈥淵eah, it鈥檚 great. I鈥檇 probably be having difficulties affording them otherwise,鈥� he says.
Chance鈥檚 case is an example of what the drug companies want:聽340B聽hospitals to limit drug discounts to poor and vulnerable patients.聽
But here鈥檚 the rub. Sometimes, instead of passing on drug discounts to patients, hospitals sell the medicines at higher prices to their insured patients. The hospitals use the proceeds to fund clinics, staff and other services that the hospitals say benefit everyone. The law allows them to do that, the hospitals say, because it鈥檚 a way to stretch 鈥渟carce federal resources鈥� 鈥� a phrase that is in the law.
翱贬厂鲍鈥檚 , assistant director of pharmacy services, says such drug sales are justifiable under the聽340B聽program because some drugs 鈥� like those for chemotherapy, for instance 鈥� can鈥檛 simply be handed over to patients. Their administration has to be supervised by doctors and nurses, which is expensive.
鈥淭he ones we鈥檙e talking about are the ones injected into your veins and they can take several hours to infuse for a single course of therapy,鈥� he says. 鈥淭his can happen for five, six days a week, for six weeks at a time, so it鈥檚 very intense. There are side effects so it鈥檚 important to have a nurse there and a doctor.鈥�
But hospitals are marking up and reselling all kinds of drugs to covered patients, not just chemotherapy drugs, says Stephanie Silverman, who is with the , a lobbying group made up of drug companies and medical organizations.
鈥淭hat鈥檚 not what the program was designed for,鈥� Silverman says. 鈥淚t was not designed to provide other revenues to support the operations of hospitals.鈥�
About one-third of the nation鈥檚 6,000 hospitals are in the聽340B聽program. Drugmakers say that slice has swollen in recent years and the program needs to be better controlled.
For example, says Silverman, many hospitals have been buying up clinics which have not qualified for the聽340B聽program, then bringing them under the hospital umbrella.
鈥淗ospitals are not only trying to maximize their own聽340B聽revenues, they鈥檙e looking to acquire 鈥� and they are acquiring 鈥� many community oncology practices, putting them in their system,鈥� she says. 鈥淎nd by doing so, they can all of a sudden tap into new revenues they couldn鈥檛 get before.鈥�
翱贬厂鲍鈥檚 Fazio says acquiring doctor practices is one way of keeping health care costs down. 鈥淚 wouldn鈥檛 go so far as saying there are hospitals gaming the system, but this is an incredibly complex program,鈥� he says. 鈥淚 will say that there are institutions out there that maybe don鈥檛 understand all the rules.鈥�
For all the disagreement, both the hospitals and the drug manufacturers agree that the federal government needs to clarify or re-write the 340B聽rules. A recent court decision had whether the new rules would be released, but the federal Health Resources and Services Administration that oversees 340B to release those new rules this month.