Over the past year, Democrats in Washington have begun to level the playing field between health care special interests like Big Pharma manufacturers and regular Americans, especially those most in need. Thanks to President Biden’s leadership and the passage of the Inflation Reduction Act, seniors will enjoy an annual cap on how much their prescription drugs will cost them out of pocket, and insulin costs will be limited to $35 per month. But while we have this new law that positively impacts Black and brown communities, we have an old law that if not properly administered by Congress, the Department of Health and Human Services and the Health Resources & Services Administration, will ultimately negate any new gains.
Three decades ago, Congress passed a law — The Federal 340B Drug Pricing Program — creating a requirement that drug manufacturers sell their medicines to certain nonprofit hospitals and community clinics at a steep discount, in some cases even as little as a penny. These hospitals and community clinics, which cannot be operated for profit under the law, serve the poorest and the most remote patients in America. The idea is that in getting drugs for low cost or nearly for free, they can and should pass along the savings to these patients in the form of free or nearly free health care. When we evaluate the facts, we see where bad actors have taken a well-intended government program and created unintended negative consequences.
I was disturbed to read a recent report in the New York Times about how a hospital chain (Bon Secours) used a hospital in an underserved, largely Black neighborhood in Richmond, Va., to turn a profit for its hospitals in wealthier, non-Black-majority neighborhoods. As one of the doctors at the hospital said, “Bon Secours was basically laundering money through its poor hospital to its wealthy outposts.” What’s happening in Richmond and in this hospital system is just the tip of the iceberg. This is yet another example of how bad actors perpetuate a systemic of racism upon America’s most vulnerable communities, plain and simple. How did we get here?
This drug discount law, known as “340B” in Beltway jargon, is well-intentioned and the right thing to do. Pharmaceutical manufacturers make billions of dollars in profit by participating in government health care programs. It’s a good thing that they must give back to make sure charitable-minded hospitals and clinics can serve the neediest patients at levels affordable to all. Unfortunately, the drug discount program is rife with fraud and benefits from almost no government oversight. Hospitals in particular that can buy the discount drugs are under no requirements to show how those savings are passed onto society’s most vulnerable patients. In fact, what often happens is that the hospitals bill insurance companies and government health programs for the full cost of the drug, even if they bought the medicine via the discounted program. That’s right — hospitals buy drugs for pennies on the dollar, then get to charge for the full price of the drug. This is a clear example of placing profits over people, not health care.
It bears repeating that most of the hospitals and clinics participating in the drug discount program are non-profits. They are not supposed to have windfalls for ownership in mind at all. They were set up as tax-free entities for the express purpose of serving the communities around them, not well-heeled management. Yet growing the bottom line is exactly what many of these entities are doing — a violation of public trust that further perpetuates the feelings by many of corruption and greed.
I applaud Richmond Mayor Levar Stoney for his leadership to direct a letter to the secretary of the Department of Health and Human Services, Xavier Becerra, in September 2022 asking for an investigation into Bon Secours. He said it best: “Inadvertent loopholes have been utilized, increasing profit margins for the hospital system while they have reduced services in one of our predominantly Black communities. It is immoral to benefit off the backs of Black and Brown residents under the guise of healthcare, and it must cease immediately.”
On behalf of those without a voice, I am calling on the new Congress to encourage oversight. Every congressperson of every partisan and ideological stripe has at least one of these discount program-eligible hospitals or clinics in their district. Towards this end our nation’s elected leaders must ask the hard questions about where the drug discount program’s savings are going. The executive agency which administers the program could also play a stronger role and provide a level of regulation that ensures our nation’s most vulnerable are served.
So what can be done? Hospitals and clinics that participate in the drug discount program are in dire need of more oversight from congressional committees and the Biden administration. As part of that oversight, the drug discount-eligible facilities should provide a detailed accounting of how the medicines they can buy for pennies on the dollar are, in fact, benefiting patients and not the bottom line.
In near future I will be convening community leaders, policymakers and private sector partners to seek a solution. It’s been 30 years since Congress created the drug discount program, and it rightly enjoys bipartisan support. But making sure the program is improving health equity, not doubling down on a system that enriches already wealthy neighborhoods at the expense of poor underserved communities, should be a top priority.