The University of Michigan hospital system says it uses a federal program to buy discounted medicine from drug companies in order to provide charity care and help the uninsured. But new research suggests the program is not being used as intended.
The 340B drug pricing program gives certain nonprofit hospitals the ability to buy medicine at a steep discount, charge patients and insurers for it, and pocket the difference. Hospitals benefiting from this program say they use the money for charity care, better equipment and other purposes.
But critics say the program drives up drug prices for everyone else and is unfair to hospitals that can’t take advantage of it, noting that hospitals simply spend the revenue any way they want.
Recent research by Lisa Grabert, a health policy professor at Marquette University, supports that view. While the 340B program was originally intended to help hospitals serve low-income and uninsured patients, that doesn’t seem to be happening in Michigan.
Grabert analyzed the cash flow of Michigan hospitals and found that participation in the federal program has little correlation to charity care. In sum:
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Hospitals able to take advantage of the 340B program reported nearly 50% higher patient revenue than comparable hospitals not able to participate.
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340B hospitals provided more than 30% less charity care.
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340B hospitals were less likely to add jobs.
So where did the money go? Hospitals taking part in the program invested twice as much revenue into financial assets and investments.
This is the latest of multiple studies with the same finding — the 340B program shifts revenue from drug companies to certain hospitals with little evidence of helping patients. That’s not a proper role for the government.
The Michigan Senate passed a bill last year that expands the 340B program further. The Michigan House has considered House Bill 4878 in committee but, so far, has not advanced it. Lawmakers should instead figure out what public benefit the program should provide if it is to continue.
