Rhode Island Needs To Fix 340B, Not Expand It — Former Gov. Howard Dean

Rhode Island Needs To Fix 340B, Not Expand It — Former Gov. Howard Dean

As a former physician and a governor, I've had an up-close-and-personal view into America's broken healthcare system for most of my adult life. All too often, corporate behemoths find clever ways to exploit well-intended programs that were meant to help low-income patients. 

 

Perhaps the most egregious example involves the little-known 340B Drug Pricing Program, which is in desperate need of more regulatory oversight. Big hospital systems and chain pharmacies are using the program to price-gouge patients -- and a new bill that's under consideration in Rhode Island, S.B. 114, could make the problem even worse. 

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Congress created the 340B program with good intentions. The program allows safety-net hospitals and community health centers to purchase drugs at steep discounts, with the understanding that they'd use those savings to increase charity care for low-income and uninsured patients and invest in underserved communities. 

 

Unfortunately, the 340B program doesn't require hospitals and clinics to pass along their savings. As a result, large health systems have turned 340B into a cash cow -- marking up drug prices for patients by nearly 1,000% in some cases, according to a recent report from the New York Times. 

 

Due to a lack of guardrails, the number of hospitals and affiliated pharmacies participating in the program has grown exponentially in recent decades. When Congress established the program, lawmakers predicted that roughly 90 hospitals would sign up. Today, well over 2,600 are enrolled -- along with tens of thousands of their partner pharmacies. Hospitals made over $44 billion from the program in 2022 -- more than double the $18.5 billion that they provided in charity care that year. 

 

As Massachusetts' Health and Human Services Secretary Kate Walsh recently lamented, 340B has become "less about a way for people to get medicine, and more about a way for health systems that disproportionately serve low-income people to profit on getting that medicine."

 

This abuse isn't a problem just for patients, though. It also harms everyone with an employer-sponsored health insurance plan -- because those health plans don't get the discounts and rebates that they'd otherwise receive when one of their enrollees is treated with a medicine purchased through 340B.

 

Nationwide, employers-sponsored health plans pay $6.6 billion extra each year due to this cost shifting. In Rhode Island, 340B abuse increases employers' spending by $32 million each year.

 

That tab could soon climb.

 

States need to do a better job of providing oversight and protecting patients from these abuses. But S.B. 114 would make it even easier for 340B hospitals to cut deals with for-profit pharmacies and expand their drug purchases through the program. That would give hospitals even more opportunity to charge outrageous markups to patients -- and shift costs onto employers and workers. The bill would increase Rhode Island employers' spending by nearly $7 million.

 

It's easy to see why hospital executives want Rhode Island lawmakers to throw caution to the wind and make 340B even easier to exploit. 

 

But it's hard to see why legislators should grant that wish. It certainly wouldn't benefit patients or workers who desperately need relief from rising healthcare costs.

 

Howard Dean is the former Governor of Vermont and a physician.