Episode 098: How the 340B Drug Program to Help the Poor Get Medicine Doesn’t Work

Today's discussion begins way back in the early 1990s when Congress was trying to figure out a way to reduce its health care expenses. Sound familiar? Some things never change. And this story is as old as Congress itself as legislators try to solve one problem and end up creating a bigger mess that actually ends up creating far more harm than was occurring with the original. It goes by the rather harmless name of the 340B program.

In the 1990s, Congress recognized the potential problem that pharmaceutical prices imposed on their budget. They also knew that drug companies did not charge the same price to everyone so it seemed logical to mandate that the government - which was the largest purchaser of drugs - receive the lowest possible price. In fact, most companies provided discounted drug prices to in need pharmacies around the country for those in dire financial straits.

However, what this bill did was force the companies to decide to sell all of their medications at the discounted charity prices - which would lead to bankruptcy - or eliminate the charity financing. Naturally, they chose to eliminate the charity leaving the poor without any means to get their medicine.

In two years, Congress attempted to fix this problem by allowing the drug companies to sell their medicines at a discounted price to qualified pharmacies and hospitals under the section 340 B provision. And that leads us to today...

In just the last couple years, the number of hospitals and pharmacies that claim the 340 B provision of charity care has exploded. There is now a majority of facilities claiming the title 340 B which gives them access to deeply discounted drug prices. Despite there being no new expansion of charity work in medicine, these hospitals buy the medicines cheaply and then sell them at their full retail price. Ironically, this occasionally makes drugs much more expensive and inaccessible for those who are poor. But it is a great profit center for the hospitals.