Lucrative drug discount program gets attention of Congress

A lucrative drug discount program that is a lifeline for charity hospitals and a money-maker for some health systems will be the subject of a congressional hearing next week.

The 340B program requires drug makers participating in the Medicaid program to give deep discounts on outpatient drugs to hospitals that treat low-income patients. The program was created in 1992 for charity hospitals like Atlanta's Grady Memorial Hospital that serve lots of low-income patients covered by government health plans.

Pharmacist Bridget McCord prepares prescriptions at Grady Memorial Hospital. It charges $5 or less to thousands of low-income and uninsured outpatients.

But the use of the program has exploded in recent years, with many hospitals that provide little charity care to uninsured patients among the heavy users.

The Atlanta Journal-Constitution last month exposed how metro Atlanta's hospitals are using the discount program.

The subcommittee on Oversight and Investigations, which is part of the U.S. House Committee on Energy and Commerce, has set a hearing on the program for Tuesday. The hearing, which is focused on examining the oversight of the program, will include testimony from the agency that administers the program, as well as congressional watchdogs that have studied the program and recommended changes.

A 2015 Government Accountability Office report that found that hospitals getting discounts through 340B were prescribing more drugs, or more expensive drugs, than hospitals that weren’t in the program. The report questioned whether potential profits of the program influenced prescribing.

“With the number of covered entities nearly quadrupling in less than a decade, the 340B program’s lack of sufficient oversight, as revealed by the GAO, is alarming,” said Rep. Tim Murphy, R-Pennsylvania, who chairs the subcommittee.  “As the program continues to expand, our first priority must be to examine how this program is impacting patients, providers, manufacturers, and other stakeholders and ensure that we are protecting program integrity.”

Hospitals that rely on the 340B program faced another potential challenge on Thursday with the announcement that the Medicare program is proposing cuts in payments for outpatient drugs that the hospitals buy at a discount. The program currently allows hospitals to get full reimbursements for drugs purchased at a discount and to use those dollars however they see fit.

"These new regulations will penalize safety net hospitals participating in 340B and severely impede their ability to sustain vital services and care to patients in the nation’s most underserved communities," said Association of American Medical Colleges President and CEO Darrell G. Kirch, in a statement released Thursday night.

To read the AJC's story examining the 340B program, click here. 

Support real journalism. Support local journalism. Subscribe to The Atlanta Journal-Constitution today. See offers.

Your subscription to the Atlanta Journal-Constitution funds in-depth reporting and investigations that keep you informed. Thank you for supporting real journalism.

About the Author

Carrie Teegardin
Carrie Teegardin
Carrie Teegardin is on the investigative team. She is a graduate of Duke University and has won numerous national journalism awards.