Read IHA’s Kevin Kerwin’s op-ed on 340B protections and what’s at stake for rural hospitals.
More than thirty years ago, through a bipartisan effort, Congress created the 340B program to help safety-net providers stretch scarce federal resources. Pharmaceutical manufacturers got access to Medicaid and Medicare formularies, which meant millions of publicly insured patients and billions in stable revenue. In exchange, they agreed to provide discounted outpatient drugs to safety-net hospitals and clinics. The goal is to preserve access to healthcare services.
The arrangement is straightforward. Drug companies gained entry to the largest public insurance markets in the country, and as intended by Congress, safety-net providers got discounts they could reinvest into patient care. Both sides benefited and had obligations.
Now, many pharmaceutical manufacturers no longer want to uphold their end of the bargain. They are restricting 340B access while continuing to benefit from Medicaid and Medicare pharmaceutical sales, even as Upstate and rural hospitals face historic fiscal uncertainty.
Meanwhile, the pharmaceutical industry is booming. Between 2000 and 2018, 35 of the largest pharmaceutical companies reported gross profit margins above 75%[1]. Consider that 62% of IHA member hospitals are operating with negative or razor-thin margins. 340B helps hospitals cover costs using pharmaceutical discounts, not taxpayer dollars. The financial strain on rural hospitals has real consequences for patients and communities.