Many Virginians are forced to balance high health care costs with daily living expenses at the grocery store and the gas pump. Working at a local clinic in Tysons Corner, I know firsthand how important it is for patients, particularly those living with chronic conditions, to get the care they need when they need it. However, one federal program that was created to help underserved patients in Virginia access needed medicines is instead being exploited by large hospital systems at the expense of both patients and independent clinics.
The little-known 340B program was established with the intention of improving access to treatments for low-income and uninsured communities. Through 340B, eligible hospitals and clinics can purchase deeply discounted medicines directly from manufacturers with the expectation that they use the savings to help patients access medications or invest in charity care.
However, what was once a well-intentioned program has veered significantly off course, turning into a hospital markup program to the detriment of us all. Due to a lack of transparency and accountability requirements, large, tax-exempt hospitals participating in 340B are using the program to generate significant profits by acquiring drugs at a discount, then charging patients and their insurers inflated prices. According to a study by New England Journal of Medicine, medicine price markups are seven times higher at 340B hospitals than at independent clinics. This markup would imply a 20-to-1 advantage in gross profits by large 340B hospitals relative to our clinic. In addition, for every $10 the most profitable 340B hospitals collect in profit, just $1 is invested in charity care. In Virginia, every disproportionate share hospital, which makes up the majority of hospitals in the 340B program, earns more from estimated 340B profit than is spent on charity care.
These markups have become a hidden tax that inflates costs throughout the health care system. When hospitals mark up discounted treatments and bill patients and their insurers more, patients, employers, taxpayers and the government are all forced to pick up the tab. The 340B program is increasing the cost of employer-sponsored health plans by $5.2 billion annually, which leads to lower wages and profits for local Virginia businesses and employees. Furthermore, last year alone, state governments incurred a whopping $2.3 billion in increased costs from lost Medicaid rebates. This loss of savings for states results in increased costs to cover medicines for Medicaid beneficiaries, leading to a higher burden on state budgets and taxpayers.
And as 340B hospitals continue to exploit the 340B program by buying low and billing high, independent providers are often caught in the crossfire. The ability to profit deeply from 340B gives eligible hospitals the upper hand in the market, creating an unfair advantage for hospitals and making it harder for non-340B hospitals and clinics to compete. This can lead to independent clinic closures and increased consolidation in our local health care system.
For Virginia patients living with chronic conditions, such as rheumatoid arthritis, Crohn’s disease, or multiple sclerosis, access to consistent and affordable care is critical to manage symptoms and lead healthy lives. But it’s clear that large 340B hospital systems have instead prioritized a “profit over patients” model, putting the pursuit of increased profit above helping patients in need.
A groundbreaking investigation uncovered that in Richmond, Bon Secours Mercy Health, a major health care chain, took advantage of the 340B program through Richmond Community Hospital, a cash-strapped, community primary care facility in Richmond’s East End, and generated over $100 million in profit through the hospital’s 340B status, all the while gutting critical health care services at the Richmond hospital, including their intensive care unit.
The 340B program is broken and needs reform to improve transparency and accountability to ensure patients are truly benefiting from the program as intended. To put a stop to unchecked profiteering, lower health care costs for Virginians, and protect the viability of local, independent clinics like the one I work for, I urge Congress to take action now to get the 340B program back on track. Virginians need relief from high health costs, and 340B reform is a common-sense way to strengthen our local health care system and improve access to needed care.
Michael Pearl is the business manager for Tysons Therapeutics, located in Tysons Corner, Virginia.