A recent New York Times report details a harrowing story about how billion-dollar hospital chains are exploiting a poor communities to turn outrageous profits.
The exploitation relies on the federal 340B drug program.
The 340B program was created federal government in 1992 to help uninsured, vulnerable and low-income patients get medicine at an affordable cost.
Under the program, hospitals can buy drugs from manufacturers at steep discounts.
In turn, the hospitals pass the discounts onto low income, uninsured patients to help them save on their prescription costs.
At least that is how the program was intended.
But that’s not how it is working.
Instead, hospitals are selling the drugs at a far higher price then what they bought them for and pocketing the profit.
From the New York Times report:
"In 2019, more than 2,500 nonprofit and government-owned hospitals participated in the program, or more than half of all hospitals in the country, according to the independent Medicare Payment Advisory Commission.
"Starting in the mid-2000s, big hospital chains figured out how to supercharge the program. The basic idea: Build clinics in wealthier neighborhoods, where patients with generous private insurance could receive expensive drugs, but on paper make the clinics extensions of poor hospitals to take advantage of 340B."
For example, a national, multi-billion-dollar hospital chain owns a community hospital in poor neighborhood in Richmond, Virginia.
Over the past 10 years, the national chain has opened nine satellite clinics in wealthy Richmond neighborhoods.
The chain legally structured these clinics as subsidiaries of the community hospital so they could us the 340B program to buy drugs at the discounted rate.
As a result, the community hospital can buy a vial of Keytruda, a cancer drug, at the discounted price of $3,444.
The hospital chain then turns around and charges $25,425, or nearly a $22,000 markup on a single vial at their wealthy satellite clinics.
A doctor who worked at the community hospital described the scheme as “laundering money through this poor hospital to its wealthy outposts…It was all about profits.”
In North Carolina, more than 50 hospitals qualify to participate in the 340B program, including many of the wealthiest: Atrium, Novant, Vidant, Duke, UNC and WakeMed.
Abuse has been so bad that the United States Senate investigated.
In one year, the investigation found that Duke University Hospital purchased $65.8 million in drugs through the discount program. It turned around and sold the drugs to patients for $135.5 million. That’s a profit of $69.7 million.
UNC received more than $65 million in revenue from selling discounted drugs from 2008-2011.
Last year, we saw an ill-advised proposal at the North Carolina General Assembly that would have sent the abuse into overdrive.
Thankfully it was rejected.
If state leaders want to make changes to the 340B drug program they should focus on making sure the program benefits poor, uninsured individuals for whom it was intended.