To the average Joe or Jane, the term “340B” might lead one to believe it’s the latest sleek Mazda model or an elevated seating section at Sacramento’s soon-to-open Golden One Arena. But for those in the health care world and the general public, the reality is that it takes on a whole new – and extremely significant – meaning: a vitally important prescription drug discount program for those in need.

For a quick historical primer, without losing you “in the weeds”, in 1992 Congress passed the 340B Drug Discount Program to help uninsured and indigent patients get the prescription medicines they needed but simply couldn’t afford. In effect, the new law required pharmaceutical manufacturers to provide significant discounts to medical clinics and qualifying hospitals as a condition of their drugs being covered by Medicaid.

Many clinics qualify for “340B” based on receiving certain federal grants – grants that typically require these clinics to use revenue from the program to improve services to the vulnerable patients they serve. However, hospitals and their satellite clinics, in turn, qualify based on a range of criteria that isn’t tied to obligations to reinvest resources into care for the uninsured, vulnerable patients.

Sadly, as is often the case with many well-intentioned government programs, just like Little Bo Peep and her beloved sheep, the 340B program has lost its way. Because of insufficient guidance and weak oversight, the program bears little resemblance to what Congress envisioned in the early 1990s, and there’s a tragic and inequitable cycle in play.

Here’s how that happened – and continues to happen:

• The drug manufacturer provides the 340B hospital with the discounted drug;
• That hospital provides medicines to patients, as was the original intent of Congress;
• Because of poor oversight, the hospital provides these medicines to the uninsured and indigent as well as those with commercial insurance;
• The hospital, in turn, bills the insurer for reimbursement at the full-negotiated rate; and
• The hospital keeps the difference as the profit and charges the patient for the drug, regardless of insurance status.

So, the bottom line is that many hospitals that are supposed to be providing medicines for those who can’t afford them are also giving these vital pharmaceuticals – at discount – to those who can afford them…and billing insurance companies at the full rate…and keeping those discounts for themselves, with very little “charity care” for the intended patients.

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