Drug Pricing Program

What Is the Purpose of the Contentious 340B Drug Pricing Program?

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If you have been following litigation related to the federal government’s 340B Drug Pricing Program, you know that the program is a contentious one. Critics claim the program is being abused while advocates insist that objections to 340B are designed to increase drugmaker profits. Here is the central question that needs to be answered to settle the debate: what is the program’s purpose? 

I recently read a post by an organization that advocates in favor of 340B. The post stated, “the purpose of 340B programs is to enable eligible providers to create higher margins on prescriptions as a means of filling revenue gaps that are inherent to their business models and patient populations.” 

Unfortunately, the statement is not true. The original intent of the program was not to enhance revenue or create higher margins on certain types of drugs. Congress intended the program to help disproportionate share hospitals make better use of the federal funds they received so that they could continue offering healthcare services to the poor and needy. 

Is Not About Profits or Margins 

You might be able to defend the previously quoted statement by saying that higher margins and more revenue allows program participants to better serve the poor. And yet, the program is still not about profits, margins, or revenues. It is not designed to help program participants improve their financial positions. It is not intended to positively impact revenues. 

A fact sheet put out by the American Hospital Association in 2023 more accurately explains the purpose of the program. The sheet states that, “the program allows 340B hospitals to stretch limited federal resources to reduce the price of outpatient pharmaceuticals for patients and expand health services to the patients and communities they serve.” 

The Association of American Medical Colleges stated something similar in a 2018 infographic. They explained that Congress established the 340B Drug Pricing Program in 1992 to help eligible hospitals improve access to vital healthcare services they otherwise might not be able to offer. 

The Heart of the Issue 

How program participants utilize the savings achieved through 340B is the heart of the issue. Program advocates can protest the fact that drug companies are making huge profits, but that is the whole point of being in business. Their profits are not at issue here. The fact is that the 340B program was not designed to increase hospital profits. It was designed to prevent escalating drug costs from preventing eligible hospitals from providing healthcare services to the poor. 

Buttressing the point is the fact that program participants, also known as covered entities, receive federal and state funds for that very purpose. They are supposed to use the funds to provide medical care to those in need. Having access to discounted drugs through 340B allows them to save money on their pharmaceutical purchases so that government money can be used for its intended purpose. 

Compliance Is Always a Concern 

Compliance with the 340B Drug Pricing Program is always a concern among both government regulators and drug manufacturers. It should be a concern among covered entities as well, which is why so many of them turn to organizations like RavinConsultants.com to maintain 340B compliance. Remaining true to the program’s original intent is a big part of it. 

Congress did not establish the 340B Drug Pricing Program to help program participants fill revenue gaps or generate higher margins on prescription drugs. They created the program to help disproportionate share hospitals continue offering services to those in need despite escalating pharmaceutical prices. To believe otherwise is to demonstrate ignorance of the program’s original intent.

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