A program that requires drug companies to give discounts to nonprofit hospitals and clinics came under fire March 15 as Republican senators pressed for more disclosure on whether the savings are really being used to help low-income patients.
But the head of a hospital trade group and some Democrats said Congress should be focusing on high drug prices instead of on medical institutions that often serve large numbers of the poor and uninsured.
Sen. Elizabeth Warren, D-Mass., said the issue was being pushed by drug companies to distract attention from their pricing practices.
The pharmaceutical industry is "pulling out the trusted lobbying playbook of blaming anybody else … so that whatever happens you make sure no one focuses on out-of-control drug prices, Warren said at a Senate Health, Education, Labor and Pensions Committee hearing on the 340B drug discount program.
"We should focus on drug prices instead of chasing around wherever the drug companies want us to go," she said.
Under questioning at the hearing, Bruce Siegel, president and CEO of America's Essential Hospitals, a lobbying group, said that if hospitals are required to disclose more information, drug companies should also be required to disclose why prices are so high.
The 340B drug discount program is coming under fire from lawmakers including Sen. Bill Cassidy, a Louisiana Republican and a doctor, who is proposing a moratorium on the program's growth and additional disclosure requirements on hospitals to say how it uses about $8 billion in discounts annually.
In addition, the Centers for Medicare and Medicaid Services, which oversees the federal health insurance programs, plans to reduce how much Medicare reimburses hospitals for discounted drugs, a move that hospital groups are fighting in federal court.
Rapid growth
The program, created in 1992, required drug companies to give the discounts in return for being able to sell medications through Medicaid, which provides medical coverage to low-income Americans.
It has grown rapidly in recent years, from 583 facilities in 2005 to 12,722 in 2017. A number of government audits, including a 2011 Government Accountability Office report, have questioned whether the hospitals are passing on the savings to patients in the form of lower drug prices.
Asked several times about rising prices, Lori Reilly, executive vice president for policy, research and membership at the Pharmaceutical Research and Manufacturers of America, or PhRMA, said the problem is that insurers and hospitals are not passing on discounts to patients.
"Us providing discounts and patients paying full list prices rings wrong to me," she told the committee.
In addition, Reilly said the 340B program is encouraging hospitals to prescribe more expensive medicines, contributing to rising healthcare spending.
Cassidy said that even clinics serving those with higher incomes receive the discounts because they are owned by 340B hospitals.
The program also fosters more healthcare consolidation, Cassidy said, because it encourages hospitals to buy physician practices that would be eligible for the discounts.
But complicating the issue is the fact that Congress never said how hospitals are supposed to use the savings, except to help them stretch scarce federal dollars, said committee chairman, Sen. Lamar Alexander, R-Tenn.
Assisting low-income patients
Hospitals and their supporters said the concern over not charging patients the discounted prices is unfounded because they use the savings to help low-income patients in other ways.
The discounts, said Sen. Patty Murray of Washington, the committee's ranking Democrat, have "helped a lot of hospitals and health centers stretch their resources and serve their communities."
St. Mary Medical Center Hospital in Walla Walla, Wash., used part of its savings to pay for clinics at schools and a drive-through clinic where low-income people could get flu shots, Murray said.
The discounts make up only about 1% of U.S. drug sales, she said. "That is by no measure a big dent. It's a single penny out of every dollar. But that small penny — that small percent — can make a big difference."
In addition to cutting the 340B program, she said the Trump administration has not acted on a proposed rule that would allow the U.S. Department of Health and Human Services to fine drug companies that intentionally charge eligible hospitals more than the discounted price of a product.
"Needless to say, rolling back rules to prevent overcharging from drug companies and cutting back programs that help make drugs more affordable is not going to get the job done," Murray said.
Still, Alexander asked Siegel, "Isn't it a reasonable question to ask if [the savings are] not going directly to lower the cost of prescriptions, where is it going?"
Siegel refused to support the idea, saying hospitals should not be the only ones subject to more disclosure, and he did not want the information being used to hurt the program.
The broader problem, Siegel said, are rising drug costs.
The program was created "to protect hospitals from runaway drug prices," he told the committee. "That was a problem then and it remains a problem now."
