Big Pharma says that lost profits from the 340B drug discount program impact investments in research and development. Really? That doesn’t square with a new Vox infographic that shows nine out of 10 major pharmaceutical companies spent far more on sales and marketing than R&D in 2013.
Johnson & Johnson spent $8.2 billion on research and development but blew more than twice as much on sales and marketing – a whopping $17.5 billion. In fact, in 2012, “pharmaceutical companies spent more than $24 billion marketing to doctors,” says Vox. That’s more than three times the size of the entire 340B program.
Meanwhile, many of the nonprofit hospitals that comprise the 340B program struggle to keep their doors open. Research and development are important for drug innovation and improving healthcare, but it’s not the 340B program that’s tying up these dollars. It’s the drug industry.
At a time when Medicaid and Medicare reimbursement rates continue to shrink, reducing or eliminating 340B could cripple safety net providers across the U.S., the president of the Institute for Healthcare Innovation writes today in Healthcare Finance.
“Without a strong and vibrant 340B program, safety net providers may not be able to afford high-priced medications developed by pharmaceutical manufacturers to address the growing needs of chronically ill Americans,” says Jeffrey Lewis. “Many patients with hepatitis C, HIV/AIDS, COPD, multiple sclerosis and asthma, for example, would have to go without lifesaving medications. The challenge, indeed the opportunity, is to create a solution that modernizes the existing 340B infrastructure.”
Covered entities should do more to “explain how 340B program savings are used and whom it benefits,” he says. “The challenge is to use Congressional oversight to explore the value of the program and explain in public hearings and on the floor of the House and Senate that the program needs to be bolstered. Town Hall Meetings should be held all across America, where Federally Qualified Health Centers, Disproportionate Share Hospitals (that often reside in America’s toughest neighborhoods) and rural clinics have helped keep communities alive by providing needed medical care.”
Click here for the complete article.
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.”