July 3, 2023 / By

Uncompensated Care and 340B: Overcoming Supply Chain Barriers to Enhance Savings and Prioritize Patient Care

Uncompensated Care and 340B: Overcoming Supply Chain Barriers to Enhance Savings and Prioritize Patient Care

Healthcare nonprofits are being targeted by drug companies, pharmacy benefit managers and health insurance companies seeking to undermine the 340B program. These relentless attacks are based on misleading comparisons and have continued without pause.

It is not sufficient that drug companies want to go back on their agreement with the 340B program; they now seek to turn lawmakers and the general public against a program that strengthens the healthcare safety net.

Charity care is commendable, but the 340B program offers much more.

Drug companies often highlight charity care percentages as a way to downplay the value provided by 340B nonprofits, pharmacy vendor manager and their brokers are creating playbooks to extract procurement savings as a revenue source for themselves and health insurance companies are reimbursing covered entities at a loss for a multitude of services. The for-profit managed care industry hopes to deceive the public into believing that 340B nonprofits should be identical to St. Jude or the like, which rely primarily on donations for funding. In contrast, 340B nonprofits often receive insufficient reimbursements for the care they provide. It’s important to note that nonprofits must have an existing relationship with a patient to fill a prescription at a 340B price, meaning that the nonprofit is already providing treatment to the person at a financial loss that the 340B savings aim to offset.

340B nonprofits primarily serve the most vulnerable Americans, from Ryan White clinics and rural health centers to urban Indian hospitals and tuberculosis clinics. These nonprofits provide a range of uncompensated care to their patients. Drug companies, PBMs, TPAs, benefit brokers and health insurance companies have made every effort to limit the number of discounted drug purchases mandated by the 340B statute for nonprofits. Now, these same organizations complain that 340B nonprofits do not directly pass on savings to patients. However, the drug companies are fully aware that nonprofits utilize 340B savings to provide health services to under-insured and uninsured Americans.

340B protects low-income, uninsured Americans

Much of the recent criticism targeting 340B focuses on large nonprofit hospital systems. According to data from the Health Resources & Services Administration, these hospitals account for the majority of 340B purchases in terms of sales value. In 2021, disproportionate share hospitals represented 78 percent ($34.2 billion out of $43.9 billion) of 340B sales. Such a significant share of purchases warrants a closer examination of the patient population served by these hospitals.

Drug companies claim that 340B hospitals serve wealthier communities, which goes against the intent of the 340B program. Research has found that the patient population eligible for both Medicaid and Medicare (typically poorer than other senior groups) is 48 percent higher at 340B hospitals compared to non-340B hospitals. The percentage of disabled patients is 37 percent higher at 340B hospitals, while the percentage of Black patients is 69 percent higher at 340B hospitals. This shows that 340B often serves low-income minority populations that have historically faced challenges in accessing and maintaining healthcare.

For-profit healthcare providers price their services to generate value for investors. These entities try to avoid or eliminate uncompensated care because it negatively impacts their financial performance. Unlike 340B nonprofits, for-profit hospitals primarily focus on returning value to shareholders and providing executives with bonuses based on revenue targets.

However, 340B healthcare delivery should not be equated with for-profit models that offer charity care solely for positive publicity. Nonprofits use 340B savings to provide healthcare services that they know will cost more than reimbursements. Many of these services are not even revenue-neutral; they guarantee losses for 340B providers. And that’s the essence: Nonprofits prioritize clinical outcomes over profit margins.

The original intent of lawmakers who developed the 340B program is crystal clear. The purpose was to assist nonprofits in maximizing scarce federal resources to reach as many eligible patients as possible. There is nothing preventing drug companies from providing additional savings to 340B except for the supply chain and for-profit models that prop up shareholder value and disregard patient care.