Several bills this session deal with a federal program known as the 340B Drug Pricing Program. Lawmakers say the measures tackle health care costs, but some health leaders say lawmakers may misunderstand what that program is and what it’s for.
The 340B program requires pharmaceutical companies to sell drugs at a discount to certain health care organizations.
Alan Witchey is the president and CEO of the Damien Center, a clinic in Indianapolis that participates in the 340B program. He said the program can be complicated and difficult to understand.
“The whole idea was this is a program that takes no tax dollars,” Witchey said.
The Damien Center is Indiana’s oldest and largest HIV and AIDS service organization. It uses the 340B program to offer a range of services including treatment, prevention, primary care and even transportation to and from medical appointments.
Witchey said the program is essential to how his clinics and many statewide provide essential care.
The program also covers certain hospitals, like critical access hospitals in rural areas.
Greene County General Hospital CEO Brenda Reetz said it is a way for “safety net” hospitals to get funding for programs that can’t survive off of just reimbursement or patient revenue.
“Because these facilities that are able to enter into the 340B program and get the benefit of it, are really those facilities that without them, it would be incredibly detrimental to those communities to not have access to this health care,” Reetz said.
How the program works
The 340B program starts with drug manufacturers selling certain pharmaceutical drugs to “covered entities” — usually clinics and hospitals — at a discount. They do this as a condition of participating in the Medicaid program which is extremely profitable for them.
The clinics and hospitals can then provide the prescriptions to patients with insurance and receive a full reimbursement for the insurance company.
Those health organizations then use the difference between that reimbursement and the discounted price to fund services, care or expand access for their communities.
“People are getting extremely discounted medications and care,” Witchey said. “And then they're getting expanded services and support, so all of that is the way that it's passed on to the patient.”
For a simplified example, a patient with insurance goes to a 340B clinic and is prescribed a 340B drug with a discounted price of $10. The typical price of that drug might be $100. The patient's insurance company reimburses the clinic the full price. Not accounting for the administrative costs of the program, the clinic has $90 to put into other services, like mental health counseling or psychiatric care.
“This was an incredible way to take federal dollars and stretch them to serve people in poverty,” Witchey said.
For hospitals, the program can look a little different in how it’s administered. But the core concept is the same.
Reetz walked through an example of a patient going to Greene County General Hospital for chemotherapy at their infusion center.
“When you come in and you need one of those medications. We pull that drug off of our shelf, we give it to you and then it goes through and it gets evaluated by a 340B team to determine whether or not that medication would have qualified for 340B pricing,” Reetz said.
There are a number of factors that determine whether or not a prescription qualifies for 340B pricing, including a patient’s insurance and the order physician. But if the patient meets all the qualifications for the program, that prescription gets put into the 340B “bucket.”
“A bucket is essentially like if you were to go to Costco and buy a case of something — that's kind of your bucket,” Reetz said. “It's kind of like we go to Costco, we buy a case at Costco price, and we bring it into our hospital.”
Reetz said people look at the savings as revenue covered entities are getting in the door, but that’s not accurate.
“It's not money that's being paid to us,” Reetz said. “It's money that's not going out our door.”
Tensions with the program
Both Reetz and Witchey said the 340B program's complicated nature makes it easy to misunderstand how savings are being passed onto patients.
And the program is facing threats at the federal and state levels.
Several bills still moving forward in the Indiana Statehouse include language related to the 340B program. Senate Bill 118 focuses on additional reporting requirements. And House Bill 1003 would require covered entities to provide 340B prescriptions to patients at the same price they got them for from the manufacturer — with some flexibility to account for the costs to administer the program.
Witchey said this legislation could be devastating for clinics.
He said they already have a heavy administrative burden with reporting and audit requirements with the state and federal government. He also said the efforts to give the prescriptions at the price clinics paid for them would be the “elimination of the program.”
“If you get rid of 340B for the clinics, one of two things would happen: Either you would have to dedicate tax dollars to help support the medical care for low-income populations, or people would not get medical care and would not get medications,” Witchey said. “It's pure and simple. It's either the taxpayers will have to subsidize it or they will not get care.”
Witchey said he thinks lawmakers are looking for more transparency and accountability from hospitals.
However, Reetz said the reporting requirements for hospitals are “completely transparent.” .
“We have to follow the same reporting requirements that everyone does,” Reetz said. “About half of the money that we get from this program goes back into administering this program. ... This is probably one of the most highly regulated programs that we participate in.”
Reetz said lawmakers forget the original intent of the program was to support safety net providers without using taxpayer dollars.
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Witchey said he wants lawmakers to carve out clinics from any of the potential state-level changes to the 340B programs, which some lawmakers attempted to do. But, he said efforts to do so have resulted in issues where some clinics are the only ones subjected to the changes.
“It's hard to be an expert in 340B because there's just all these different levels and dynamics,” Witchey said. “I completely understand why the current language happened, but I do think that we have an opportunity still to fix this. And we have an opportunity to make sure that health care is affordable and available to those who can get the most.”
Witchey said he wants to make sure the lawmakers understand the changes they are making so clinics and low-income Hoosiers are not hurt in an effort to address health care costs.
How clinics and hospitals use the program
As a component of the federal grants clinics receive, 340B money has to be used before federal funding — and sometimes even state funding — can be spent. Witchey said this means before taxpayer dollars can be used, clinics have to use the funding they generate from the 340B program.
He also said clinics typically have stricter rules and safeguards for what they can use 340B money on. But it can help them cover things outside of what their grant may be able to cover.
For example, medical transportation is allowable under 340B, but not under some grants. So the Damien Center uses what they call “program income” from 340B to provide that service. But, they aren’t able to use 340B funding to construct buildings.
Witchey said the clinic system includes care for HIV, sexually transmitted diseases, black lung and sickle cell. But, he also said clinics provide a significant proportion of primary care in Indiana and the 340B program is critical to funding that.
“We provide a sliding scale so everybody can afford their medical care and their medications,” Witchey said. “It could go to labs that otherwise would be unaffordable for clients or patients. It can cover all kinds of things like food or supportive services that help bring people into care, too. It really provides a wide range of wraparound services. But they have to be eligible within the scope of work.”
The program income also helps supplement low Medicaid reimbursement. Witchey said if the Damien Center didn’t have the 340B program, they would have to turn away Medicaid patients because the reimbursement doesn’t cover the cost of care and the overhead to run the clinic.
“Which is what you see a lot in private practice, right?” Witchey said. “You'll see a very limited number of Medicaid patients allowed in a private practice — that could be 5 percent — because for a private practice, that's a loss of money.”
But, Witchey said for the people served by the Damien Center, that could be devastating.
“If you get tax dollars in some way to provide care for poor, low-income, homeless populations, and so on, then you would be able to use this program,” Witchey said. “Because the funding you get isn't enough to cover the practice that you're providing. It doesn't cover all the medical expenses, all the care to help people, different things to help people stay in care.”
Reetz said the hospitals included in the program are facilities that act as a safety net in communities.
“This is a way for those entities to get some extra funding, to be able to support some programs that maybe don't have the best reimbursement and are even programs that are ‘losers’ — in essence of, we don't make money off of these programs,” Reetz said.
Rural hospitals don’t always have the population size needed to make certain types of services financially sustainable — even, Reetz said, if they are critical for the community.
For example, it costs a lot of money to maintain an obstetrics department. And rural communities typically have low delivery numbers. Reetz said hospitals tend to lose money on OB departments when they don’t have the “economy of scale” that larger organizations have.
She said Greene County uses program income from the 340B program to maintain those services.
“Without it, I'm absolutely certain that there would be women and children in our community that wouldn't be alive today if we weren't available in Green County, " Reetz said. “You can imagine, you wouldn't want to have to travel over an hour if you're having a critical situation going on with a pregnancy.”
Reetz said the hospital also has a perinatal navigator program, where a social worker and a nurse can go out and visit parents that need help and support during pregnancy and up to 18 months afterward.
She said the program income contributed to the hospital adding specialists and bringing in visiting specialists for its patients. And it also helped them establish a cardiopulmonary rehab center.
“Living in a rural community means that people can't necessarily travel to Indianapolis or elsewhere for care,” Reetz said. “It gives them a way to get that sort of daily care that they need within our community. And without this type of 340B funding, we wouldn't be able to support programs like that.”
Abigail is our health reporter. Contact them at aruhman@wboi.org.