340B Program Fails to Rescue Rural Hospitals – ALEC

TL/DR –

Rural hospitals in America are facing financial difficulties due to low patient volumes, low reimbursement rates, and challenges in retaining healthcare providers. Some believe that the federal 340B program, which offers prescription drugs at discounted rates to providers in underserved areas, could help save these hospitals. However, it’s argued that the program is not a solution to the financial challenges faced by rural hospitals, as much of the profit often goes to pharmacies and Pharmacy Benefit Managers (PBMs), and the issues faced by rural hospitals extend beyond what the program was intended to address.

Rural Hospitals’ Financial Crises: Is the 340B Program the Solution?

Rural hospitals across the US are dealing with financial difficulties. Factors such as low patient volumes & reimbursement rates, healthcare provider retention issues, and the controversial Medicaid Expansion contribute to their precarious situation. A potential solution being explored is the federal 340B program.

The 340B program was established to support Americans struggling with prescription drug costs. It aids healthcare providers, often in rural and low-income areas, who cater to uninsured and economically vulnerable patients, by providing drugs at significantly discounted rates. This support enables these “covered entities” to enhance and grow their services.

Since its inception in 1992, the 340B program has been advantageous to rural hospitals. Some states aim to expand the program’s scope beyond its initial purpose, by obligating drug manufacturers to sell to contract pharmacies at 340B discounted rates, thereby hoping to sustain these rural healthcare providers.

Participating hospitals benefit financially from the program by prescribing medicines bought at the 340B price and billing the patient or their insurance at the standard negotiated rate. The profit margin between the 340B price and the regular rate is shared amongst the hospital, the pharmacy, and potentially a pharmacy benefit manager (PBM).

Several states have tried enforcing 340B discounted prices for all contract pharmacies; a move that has sparked legal battles. Advocates of this strategy argue that it will aid in saving rural hospitals. While it’s valid that many of these hospitals participate in the 340B program, it’s misleading to claim that the program alone can resolve the financial challenges they face.

Decreased usage is a principal factor in rural hospital closures. A 2020 study revealed that 76% of patients from rural counties sought care outside their local areas. Common contributors to these closures include alleged fraud or mismanagement, low reimbursement rates, natural disasters, and staffing issues. These hospitals often lack sufficient funds for innovation and new treatment options.

Those relying on 340B profits to rescue rural hospitals will find it disheartening that a large percentage of these profits go to pharmacies and PBMs. One study estimates that $2.58 billion in 340B savings went to PBMs in 2021. Thus, viewing the 340B program as a panacea for rural hospital financial difficulties is misguided.

Rural hospitals are up against significant challenges, and it’s unrealistic to depend solely on the 340B program for solutions. The program was designed to aid patients and help hospitals in underserved and poor regions deliver better care, not bail out hospitals or inflate pharmacies and PBMs’ profits. The issues these hospitals face require multifaceted solutions, not just increased reliance on government subsidies.

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