Critics say 340B hospitals aren’t providing enough charity care

As hospitals say they’re taking significant losses due to cuts in a federal drug discount program, a new report contends some of those hospitals should be offering more charity care.

A group seeking reforms in the 340B program released a new report Thursday saying some hospitals receiving discounts on drug purchases could be offering more free or discounted care to those who need it. The Alliance for Integrity and Reform of 340B contends most hospitals participating in the program offer charity care at a lower rate than the average hospital.

Under the 340B program, hospitals serving a large number of residents with lower incomes can buy certain drugs at lower prices and receive higher reimbursements. Hospitals say the 340B program helps them care for those in underserved communities and they argue cuts to the program are threatening essential programs and services.

Critics say the program has grown too large and some healthcare organizations are taking advantage of a well-intentioned program.

The alliance report said 65% of hospitals participating in the 340B program provide less charity care than the average hospital. For 25% of 340B hospitals, their charity care accounts for less than 1% of their operating costs, the report stated.

At the same time, the 340B program has grown significantly, rising from $9 billion in 2014 to $38 billion in 2020.

Bob Dold, a former Republican congressman from Illinois and spokesman for the alliance, said the growth of the program isn’t producing more benefits for those in need.

“The consistently low levels of charity care paired with dramatic growth in 340B program further proves 340B is not working how Congress intended,” Dold said in a statement. “Changes are needed to strengthen the program’s eligibility standards and hold covered entities accountable.”

Maureen Testoni is president and CEO of 340B Health, an advocacy group that represents more than 1,400 hospitals. Testoni said the report’s results are “grossly misleading.”

“You can’t compare a large public hospital to a small rural hospital and produce results that are accurate or relevant,” Testoni said in a statement.

“Published research shows that when you compare hospitals by size, 340B hospitals consistently provide more uncompensated care than non-340B hospitals," Testoni said. "In fact, 340B hospitals are responsible for 60% of all uncompensated and unreimbursed care while representing only 40% of acute care hospitals. They also provide 75% of all inpatient care for Americans with low incomes who are on Medicaid.”

Earlier this month, the 340B Health group released a survey that said hospitals were taking a substantial hit due to drug companies reducing discounts in the 340B program. The median loss for large hospitals was $1 million, but some hospitals were losing several million dollars. Smaller hospitals in rural areas were also taking substantial losses, the group said.

The 340B Health group contends more than a dozen major drug companies have illegally rolled back discounts in the 340B program.

In 2021, the Health Resources and Services Administration threatened fines against several drug companies over the changes in pricing, but pharmaceutical firms have won court battles in recent months.

On Wednesday, the U.S. District Court for the District of Delaware ruled HRSA acted improperly in trying to order AstraZeneca to resume deeper discounts on drugs in the program, Bloomberg Law reported.

The U.S. Supreme Court heard arguments last fall in a highly-watched case about the federal government’s cuts to the program. The American Hospital Asssociation filed the suit with the support of other healthcare groups. The high court has yet to issue a ruling.

Former President Trump’s administration implemented the cuts to the program, and President Joe Biden’s administration has continued the policy. The Biden administration said hospitals in the 340B program will still be getting substantial discounts on outpatient drugs, and savings in the program will be passed onto other Medicare programs serving hospitals.

Some for-profit hospitals and rural hospitals have supported the government’s approach, saying the move has produced greater reimbursements for institutions outside the 340B program.

The 340B program has inspired intense debate for years. Drug comapnies argue the program has ballooned beyond its initial intent of offering helpt for safety net hospitals. Consumer advocates have said reduced prices on drugs in the program aren’t getting passed down to patients.