States are pushing back against attempts by drug companies to roll back a discount program “safety net” health providers use to care for vulnerable, low-income Americans.

The 340B Drug Pricing Program lets some hospitals and clinics, mostly in rural, working-class communities, buy outpatient drugs at discounted prices from pharmaceutical manufacturers who participate in Medicaid and Medicare.

The program, which does not use any tax dollars, enables these “safety net” healthcare organizations to use the savings from these drugs to fund more services for eligible patients and their communities.

“The 340B program is vital to our small, rural areas and the healthcare providers who serve them,” former U.S. Rep. Billy Long (R-Mo.) told InsideSources.

Long, who has advocated for the program for years, notes that approximately one in five Americans live in rural areas, which equates to about 60 million Americans across the country who rely on these healthcare services.

Long has also warned that “almost 30 percent of rural hospitals are at risk of closing, primarily due to financial difficulties.”

But the Pharmaceutical Research and Manufacturers of America (PhRMA) and its allies are fighting to restrict the program. They argue some hospitals and clinics are making a profit when they retail the covered drugs to patients able to pay the full price for covered medications.

“Hospitals pocket as profit the difference between the amount they are reimbursed and the discounted 304B price they paid,” wrote Nicole Longo in a December 2023 blog for the Pharmaceutical Research and Manufacturers of America (PhRMA).

Supporters respond the small markups provide revenue these “safety net” providers need to stay open and serve rural and low-income communities. Many of those communities have been hit hard by the opioid crisis and the related spike in HIV diagnoses. They are areas where once-dominant manufacturing and mining jobs have since disappeared, leaving residents in positions of often extreme economic insecurity while battling injuries and illnesses related to their former jobs that are often fatal, chronic, and, in any event, costly to treat.

In recent years, drug manufacturers have even declined to offer 340B discounts on their covered outpatient drugs, creating disruption for the patients who rely on them.

As the drug industry increases its pressure on the program, some states are fighting back.

Arkansas and Louisiana have enacted laws protecting contract pharmacy arrangements. Those laws target manufacturer conditions on the delivery of 340B drugs to contract pharmacies and prohibit them from refusing to supply the discounted drugs.

And the Virginia legislature just passed a similar law.

Major U.S. healthcare stakeholders also support the program.

Groups like the American Hospital Association (AHA), the Catholic Health Association of the United States and the Children’s Hospital Association released a joint statement defending the program and urging Congress not to add restrictions. They argue that some patients have health conditions which have advanced to the point of requiring the “specialized, complex care only hospitals can provide” at this time.

“Because 340B cuts would leave fewer hospital resources to help pay for uncompensated and unreimbursed care, this proposal would be especially harmful to patients who are uninsured, underinsured, and dependent on public health programs, such as Medicaid,” the groups said. “Without access to 340B discounts, it will be more difficult for patients to receive the same level of care from their community health providers.”

The challenge of providing rural healthcare is real. According to data from the University of North Carolina’s Rural Health Research Program, 75 rural hospitals have completely closed. Another 56 have been converted to provide other services over the last decade.

In the past, a government mandate like 340B might have been a knee-jerk target for red-state politicians. But the GOP’s new focus on working-class families and rural voters combined with skepticism of the pharmaceutical industry in the aftermath of the COVID-19 pandemic and controversies regarding children’s health care have changed the calculus. Some of the program’s strongest supporters have been rural, red-state Sens. John Thune (R-S.D.) and Shelley Moore Capito (R-W. Va.)

However, members on both sides of the aisle agree the program, created in 1992, may need some modest reforms. Last summer, they were part of a bipartisan group asking stakeholders to participate in the conversation about the future of 340B.

“While the program does not utilize federal taxpayer dollars, federal oversight is necessary to ensure the program functions as intended,” they wrote.

“Our goal is to ensure the 340B program has improved integrity and stability, and that it continues to enable eligible health care providers to stretch federal resources to better provide healthcare for the patients they serve.”

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