Politicians love to promise to weed out waste, fraud and abuse from federal spending but even when it is staring them in the face they often do nothing. That’s exactly what the Department of Health and Human Services (HHS) did when confronted with the reality that a congressionally established program to help the poor and indigent get discounted prescription drugs was being abused by corporations to pad their bottom line.
In 1992, Congress established the 340B Drug Discount Program (340B) to help underserved communities get access to prescription medicines. Designed to reduce outpatient drug costs by mandating deep discounts from drug manufacturers as a condition of Medicaid reimbursement. The program remained small until it was radically expanded under provisions enacted by ObamaCare drawing the attention of Wall Street financiers and lobbyists for the contract pharmacies who realized little safeguards existed. They soon realized they could receive drugs at a discounted rate and charge the government and private insurance companies for the full freight, pocketing the difference between the discount and the actual cost of the drug.
Faced the the endless possibilities of profits from the government created goldmine, the 340B program has expanded rapidly with hospitals and chain drug stores like CVS getting into the act. Duke University made almost $50 million off of the program when its hospital purchased $65.8 million in drugs through the discount program, which saved $48.3 million. It sold the drugs to patients for $135.5 million, for a profit of $69.7 million. Some of New York City’s top nonprofit hospitals have gotten on the gravy train. The wealthiest hospital in the City, New York Presbyterian gave 1 percent of its nearly $4 billion in revenue to discounted services to the poor.
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Talyst, that is a consultant to hospitals and contract pharmacies that paid lobbyists to expand the 340b program is now openly bragging to its clients about the profitable possibilities for their clients thanks to the program. In a recent white paper, the firm stated “There is no requirement to pass the savings on to patients directly. (http://www.talyst.com/wp-content/uploads/Talyst_White_Paper_Benefit_Becoming_Contract_Pharmacy.pdf). The “Talyst AutoSplit Contract Pharmacy solution” allows the “negotiated dispense fee from the hospital will be in addition to your normal profit margin.” Translation: You pocket the discount.
This is fraud, pure and simple, yet when confronted with the evidence, HHS decided to do nothing. Last week, HHS withdrew a proposed regulation to create sweeping rules that would have damaged the cottage industry bilking taxpayers, insurers and patients of hundreds of millions of dollars. Instead, the agency intends to offer “guidance” to the stakeholders.
Congress must get involved and reform the program, but it won’t be easy. The beneficiaries have formed their own lobbying group known as the 340 Coalition not only to fight any reforms of the program but to seek further expansion. Sens. Chuck Grassley (R-Iowa), Orrin Hatch (R-Utah) and Mike Enzi (R-WY) are among those who have been leaning on the Obama administration to fix the program. With a Senate majority, they should move quickly to end the abuse.
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