Yves here. It is disheartening how the Democratic Party and the elite relish complex programs, especially in eligibility rules to make the poor pay for time and stress, then serve as a mechanism to eviscerate them. This article discusses how drug companies are seeking to limit or end the federal 340B drug rebate program, which requires drug companies to offer price reductions to certain customers in exchange for Medicare and Medicaid. Their method is to twist its economy, which isn’t hard to do since hardly anyone outside of Big Pharma really understands this.
Note that unfortunately, in keeping with this fact, this article does not provide as much detail about the program itself or the distortions as I would like. I guess the author was worried that it would produce MEGO (My Eyes Glaze Over) in readers.
By John Arcano, policy analyst at the AIDS Healthcare Foundation. Originally posted on Common dreams
The recent flurry of articles on the 340B Drug pricing program so-called “uncontrollable” growth relies on erroneous comparisons and fuzzy calculations. News reports and opinion columns often cite misleading statistics from opponents of the 340B.
Pharma-approved “experts” have become notorious for offering low praise for the good intentions of a program gone wrong. The false concerns obscure their true intent, which is to drain 340B.
The truth is, the program works today the same way Congress intended it to when it started in 1992. The pharmaceutical company spin says 340B has turned into an unrecognizable program for federal lawmakers. But, if 340B has certainly grown since its creation, the program is not on autopilot.
Drug makers have the full range of trade insurance and federal rights to reap huge profits. Yet the pharmaceutical industry remains dissatisfied with less than outrageous profits for a small slice of prescription drug sales.
Critics of the 340B obscure the true nature of the 340B program by referring to its federal origins. The tact is meant to trick Americans into thinking they are footing the 340B bill. But the program is not analogous to Medicare and Medicaid.
Unlike federal benefit programs, future beneficiaries do not contribute to the program and expect returns upon retirement or as a safety net, should they face economic hardship. The government does not fund 340B with payroll taxes. In fact, the purchase of 340 billion drugs does not cost the government a penny. Taxpayers are not responsible for a single 340B purchase.
Pharmaceutical companies, not taxpayers, fund 340B drug purchases. And why do drug companies offer discounted prices to nonprofit healthcare providers? In exchange for rebates on less than 8% of total drug spending in the United States, pharmaceutical companies can access the much more lucrative Medicare and Medicaid prescription drug programs. Drug manufacturers are not obligated to participate in 340B; instead, they eagerly entered the program, salivating millions of customers backed by a guaranteed federal paymaster.
Pharmaceutical companies are using drug pricing gimmicks to exaggerate the size of purchases by $340 billion. Instead of using the actual price, drugmakers use their list prices to measure the relative size of 340B. According to this metric, 340 billion sales in 2021 were recorded $93.6 billion.
But think of the drug company’s list price as the list price for a new car. Car dealerships and pharmaceutical companies can set their prices as they wish. Consumers only care about what they pay for cars, and in this case, their medicine. And, just like cars, no one pays the list price for prescription drugs. The federal government certainly does not, nor do state Medicaid departments.
Neither do consumers. Private insurance covers the overwhelming majority of prescription drug expenses for their plan holders. Taxpayers subsidize those who rely on federal assistance to obtain prescriptions. In 2021, actual purchases of 340 billion actually represented $43.9 billion. Yet the taxpayer does not fund 340B. The rebates come from the profits of the pharmaceutical companies – the revenue-generating drugmakers more than compensate through the quid pro quo agreement that allows the sale of drugs to patients in the eligibility program.
The basic math doesn’t stop there. Drug companies want Americans to believe that 340B is the main driver of skyrocketing prescription drug prices. 340B, however, represents a fraction of overall prescription drug spending in the United States. In 2021, the health system spent $603 billion on prescription drugs before discounts; retail drugs accounted for $421 billion of the total.
According to the pharmaceutical industry, 340B’s “explosive” growth means it will have to make up for the supposed loss of revenue elsewhere. In reality, pharmaceutical companies are more concerned that they cannot charge arbitrary list prices to not-for-profit vendors.
Drugmakers want Americans to believe that without $340 billion, drug price increases would magically disappear. In a way, Medicare Part D – a program more than 2.5 times the size of 340B ($110.1 billion in 2021) in terms of net spending—has less to do with rising drug prices than with the program that is cutting profits for the pharmaceutical industry.
For some reason, drug companies never complain about the explosive growth in federal drug spending. And why would they? Drug manufacturers are the main beneficiaries. When it comes to 340B, the pharmaceutical industry’s incalculability is matched only by its greed.
Drug makers have the full range of trade insurance and federal rights to reap huge profits. Yet the pharmaceutical industry remains dissatisfied with less than outrageous profits for a small slice of prescription drug sales. The pharmaceutical industry’s miscalculations put the $340 billion sales on the wrong side of the ledger.
Without 340B, drug companies wouldn’t make money on medically underserved people. Drugmakers should stop exaggerating the size of the $340 billion purchases and stick to the terms of a deal they voluntarily entered into.
