The drug industry and its surrogates love to repeat the ridiculous line that the 340B drug discount program “is being exploited by rich hospitals to boost their bottom lines.” Drug companies, they claim, are “incurring heavy losses from 340B abuse,” as one drug company apologist recently put it.
SNHPA has created an infographic that sets the record straight. It compares the Top 12 Fortune 500 drug companies’ profits with the average operating margin for U.S. nonprofit hospital systems. We encourage you to circulate it widely.
So, what’s the real bottom line when it comes to 340B and profits?
Nonprofit hospital systems are struggling to stay above water. Their average operating margin is 2.2 percent.
That’s hardly a portrait of rich, exploitative hospitals, is it?
And how are big drug companies faring? Pfizer’s profit margin is above 40 percent. Gilead Sciences, the infamous maker of the $1,000-a-dose drug Sovaldi, has a profit margin above 25 percent. Amgen, Biogen Idec, Celgene, AbbVie, and Lilly all have margins above 20 percent.
Pfizer is “padding its bottom line” (to borrow phrase from Big Pharma) with more than $22 billion in profits. Johnson & Johnson is “pocketing” nearly $14 billion, Amgen more than $5 billion, and Lilly, AbbVie, and Merck all more than $4 billion.
Around $330 billion is spent on prescription drugs in the U.S. annually. Total sales through the 340B program add up to around $7 billion, or about 2 percent of the U.S. market.
And drug companies complain that they are incurring “heavy losses” from 340B abuse?
It doesn’t pass the smell test.
Drugmakers and others who want the 340B program to disappear sometimes argue there’s less need for the drug discounts in the post-Obamacare era. New research shows why they’re wrong.
Underinsurance in America is growing, as non-elderly adults are paying more out-of-pocket for private health insurance, a new Commonwealth Fund study finds. What’s more, the problem is most acute among low-income Americans who depend on 340B hospitals.
This fall, the health care think tank surveyed 2,751 adults ages 19 to 64 about their health insurance and health care costs. Twenty-one percent of those who either had insurance through an employer or bought it themselves spent 5 percent or more of their income on out of-pocket costs, not including premiums. Thirteen percent of privately insured adults had a deductible of 5 percent or more of income.
“Adults with low incomes had the highest rates of steep out-of-pocket costs,” the group said. “About three of five privately insured adults with low incomes and half of those with moderate incomes reported that their deductibles are difficult to afford. Two of five adults with private insurance who had high deductibles relative to their income said they had delayed needed care because of the deductible.”
“Adults with lower incomes were significantly more likely to say it was difficult to afford their copayments or coinsurance than were adults with higher incomes,” the group also said. Forty-six percent of insured adults with incomes under 200 percent of poverty said that because of their copayments or coinsurance, they had delayed needed care such as filling a prescription.
Cancer patients treated in hospital outpatient departments are almost four times more likely than those treated in physician offices to be uninsured or covered by Medicaid, a new study commissioned by the American Hospital Association shows. They also tend to be sicker and come from lower-income communities.
Unlike other studies that have erroneously examined the zip codes of hospital clinics, the new research correctly focuses on the demographics of the patients themselves. It finds that cancer patients treated in hospital outpatient facilities are twice as likely those treated in a physician’s office to be black or Hispanic. These individuals are also more likely to have severe chronic health conditions and have been in the emergency room more often. These conditions include congestive heart failure, hypertension, diabetes, and obesity.
The new data are no surprise. Safety-net hospitals treat huge numbers of needy cancer patients. Private oncologists also make a point of sending their underinsured and uninsured patients to the nearest hospital for treatment because they can’t make any money on them.
Bravo to former Congressman Gil Gutknecht for his Veteran’s Day op-ed in Tucker Carlson’s The Daily Caller news site urging “policy makers in general and conservatives in particular [to] fight to defend and preserve” 340B. Read it here and spread the word about it on Twitter and other social media.
Gutknecht, a Minnesota Republican, served six terms in the U.S. House starting in 1994. While in office, he made a name for himself for his dedication to holding drug companies responsible for the prices they charge.
“Big Pharma has long made sure Americans pay the highest prices in the world by blocking the importation of the same medicines that they sell overseas for a fraction of the cost,” he writes in the new essay. “It gets worse. The pharmaceutical industry has dispatched its small army of lobbyists to derail a key drug discount program called 340B.”
“Because it’s funded by drug companies, the 340B program isn’t a government handout,” Gutknecht notes. “It’s a mechanism that helps hospitals and other healthcare providers better serve needy patients. And because it allows poor patients to get the medicines they need, they’re more likely to recover and avoid returning to the emergency room on the taxpayer’s dime. It also saves money for Medicaid, the state-federal partnership that helps low-income and disabled patients.”
“That’s good news for fiscal conservatives and small-government advocates alike,” he says.
Gutknecht currently consults with a number of companies and organizations, including Safety Net Hospitals for Pharmaceutical Access.
We wrote about SNHPA’s and AHA’s reactions to the Health Affairs study earlier this month. Researchers Rena Conti and Peter Bach said they found that “that hospital-affiliated clinics that registered for the 340B program in 2004 or later served communities that were wealthier and had higher rates of health insurance compared to communities served by hospitals and clinics that registered for the program before 2004.”
“Our findings support the criticism that the 340B program is being converted from one that serves vulnerable patient populations to one that enriches hospitals and their affiliated clinics,” they concluded.
After reading the study, Carpinelli Wallack wrote, “I had two questions: First, how are the authors substantiating their conclusions? Second, what kind of sensational sound bites are going to come from this?”
“Simply put, the authors’ conclusions are not substantiated by the data collected,” Carpinelli Wallack said. “Conti and Bach say that they ‘found’ that hospitals ‘served communities that were wealthier and had higher rates of insurance’ and ‘generated profits.’ They did not find this.”
“At most, the researchers’ data supports the fact that there is a statistically significant difference in the socioeconomic status between the areas where the hospital is located and the areas where its affiliated clinics are located,” she continued. “This is a far cry from the headlines concluding that hospitals are ‘enriching’ themselves off a program intended to help the poor.”
Carpinelli Wallack said she was saddened that the study’s “misleading conclusions will only serve to support 340B critics’ mischaracterization of program intent.”
“Responsibility in research is important if we are to have accurate and fair discussions about policy issues like the 340B program,” she said. “The 340B program is complex and absolutely needs more structure and oversight, but it does not need misleading and loaded rhetoric like ‘enriching and profiting.’ That type of terminology might be common in the current attack of the program by the drug industry but I would expect a more nuanced viewpoint from a scholarly piece such as this.”
Hospitals groups have issued strong rebuttals of a new study in the journal Health Affairs that its authors say supports criticism by the drug industry and others that disproportionate share hospitals increasingly use 340B savings to help themselves at the expense of the poor.
In a reply article published in Health Affairs, Safety Net Hospitals for Pharmaceutical Access says the study “neglects an essential point: compared to non-340B DSH hospitals, 340B DSH hospitals provide over twice as much care to Medicaid and low-income Medicare patients, and almost twice as much uncompensated care.”
“340B DSH hospitals across the board provide high levels of uncompensated care,” SNHPA’s response continues. “For these and other reasons … the article does not support the criticism that 340B DSH hospitals are no longer serving vulnerable patients.”
The American Hospital Association also took strong issue with the study. In its AHAStat blog, the group said the report “does a real disservice to this important program that has a proven track record in helping patients get the medicines they need.”
The study in Health Affairs, by Rena Conti of the University of Chicago and Peter Bach of Memorial Sloan Kettering Cancer Center, is entitled “The 340B Drug Discount Program: Hospitals Generate Profits by Expanding to Reach More Affluent Communities.” In a May 2013 opinion article in JAMA, Conti and Bach said some hospitals were earning “windfall” profits on cancer drugs purchased through 340B ” that might not be directly benefiting the poor.” Conti was a featured speaker at the drug industry-led group AIR 340B’s “national summit” on the drug discount program this past June.
Also in June, Health Affairs published a different study that helped to explain why 340B will continue to be needed after the Affordable Care Act is fully implemented. It found that, despite health care reform, safety-net hospitals’ uncompensated care costs and Medicaid shortfalls will keep climbing in California and the states that do not expand Medicaid.
The St. Louis Post-Dispatch published a strong op-ed from Ascension Health that highlights the importance of 340B to both the health system and patients. Ascension CEO Bob Henkel describes exactly how 340B saves lives. He also called out big pharma stating, “We need the help of the pharmaceutical industry to ensure the poor and vulnerable are not priced out of access to the medications they need to keep them out of the hospital, and to ensure a good quality of life.”
Click here for the full article.