340B Crony Capitalism Makes Cancer Treatment More Expensive

It’s like the old Clint Eastwood classic: The Good, the Bad and the Ugly: in Washington, there’s the once-in-a-while good thing (getting rarer every year), many, many bad things, and the occasional ugly outrage that’s past preposterous and well on the way to ludicrous.

Although relatively little-known, the massive fraud hospitals are perpetrating with the Medicare “340B” program puts them in Michael Jordan territory of crony capitalism. These companies are shielding their shady practices with crocodile tears for the poor while actively harming the people the program was originally intended to help and padding their profits while prices rise for the rest of us.
By way of background, 340B is part of a law enacted in 1992 that required drug companies to sell at steep discounts (up to 50%) to community health centers, clinics, and hospitals that serve a high percentage of patients that are less fortunate. That sounds reasonable enough, and initially, the program served a small number of clinics that were truly deserving of the discounts.

But as a new study from the Community Oncology Alliance exhaustively documents, hospitals began converting the program into their own personal money-making machine starting around 2005, after which the number of participants has skyrocketed 367 percent.

But what sets these guys apart from your average, run-of-the-mill Washington swamp denizen is that many hospitals aren’t even passing the discount they receive on to patients. There’s a convenient loophole in the law that requires the drug companies to sell the drugs at the steep discount, but allows the hospitals to charge the patients the full rate, pocketing the difference.

The new study also shows that this trend in poverty profiteering hurts more than just the patients who are serving as the mark. It’s actually driving industry-wide price increases and altering how hospitals treat patients, all in the name of the bottom line.

Hospitals now view chemotherapy as a major line of business, which could be productive but is happening for all the wrong reasons. Namely, drugs to treat cancer are among the most expensive, so the marginal profit from running the 340B scam is the highest for those drugs. So is it any surprise that between 2004-2014, “the proportion of chemotherapy infusions delivered at hospital outpatient departments nearly tripled”?

Meanwhile, Joe taxpayer is footing the bill for all this. One study found chemotherapy treatment was roughly 10 percent more expensive at hospitals participating in the 340B program, for example. Given the scale of health care costs, that turns out to be a serious amount of money, even by Congress’s standards.

“It is clear that many hospitals are entering the 340B program for reasons other than compensation for the charity care they provide,” the study says, adding that the “non-profit” hospital at Duke University returned a five year profit of $282 million from the 340B program alone.

Clearly, this is a program in need of reform. It’s one thing to help keep an inner-city clinic’s doors open, ensuring care for under-served populations. Everyone supports that. But when you cynically exploit the support of that idea to run a massive con on patients and taxpayers, significantly worsening the entire health care system in the process, you’ve crossed a line.

This program is exactly the type of thing people had in mind when President Trump’s denunciations of the Washington swamp held so much resonance during the campaign.

The time for business as usual has passed. It’s time to start eliminating the cruft of a corrupt system. The massive 340B con is a perfect place to start.