The Medicaid Drug Rebate Program isn’t new; in fact, it’s been in place since 1990. Congress was looking for new ways to regulate the so-called “ceiling prices” drug manufacturers provided for Medicaid recipients. They accomplished this by making Medicaid a “preferred provider”, complete with the requirement that Medicaid provide the same “best price” across the board, whether it was the same or lower than other health insurance companies. It was those two little words: ”best price” that put the wheels in motion – for the good and the bad. Now, they’re banking on Medicaid’s 340B program to level the playing field.
It succeeded in keeping the players in a fair game, but there were no provisions for charitable giving. Before the program was put into place, drug companies had the freedom of giving prescription drugs to various healthcare facilities, hospitals and doctors’ offices. It typically targeted those areas with higher numbers of low income families. It provided a tax break for the drug companies and built good doctor-patient relationships, not to mention the innumerable benefits it provided the patients in need of those medicines.
Once it was passed, because lawmakers failed to address those important charitable efforts, drug companies were no longer allowed to differentiate between the wealthy and the poor. In other words, if the manufacturers donated one hundred antibiotic treatments to a doctor who cared for low income families, it also had to donate the same to every other doctor or healthcare facility. Suddenly, hospitals, doctors and community medical centers often ended up eating the costs of those drugs.
This went on for a couple of years until Congress attempted to right the wrong. It sought to do this by passing the Public Health Service Act, or PHS. In this piece of legislation, the 340B program was born. It essentially put back into place the options for drug companies to donate or slash prices for important medications in those lower income communities. Sort of. Instead of stepping aside or backing out of it, Congress opted to lower the ceiling prices of what the drug companies could charge health care providers serving those in need. There was a qualification process and still, there seemed to be a lack of “charity” in the “charitable efforts”.
Still not acceptable, Congress has gone back several times to tweak the program. Most recently, it added a Disproportionate Share Hospital inclusion for cancer centers, rural medical centers, children’s hospitals and a few more designated facilities. These healthcare providers must apply for participation and the state must either own or operate the facility or operate as a non-profit facility licensed to provide indigent care. It must meet all of Medicaid’s payer mix criteria and finally, if a healthcare provider meets those criteria – it MUST participate. If they fail to do so, they jeopardize their funding, risk negative audits and could see themselves losing certain allowances.
If you’re wondering when this “train wreck waiting to happen” will barrel toward taxpayers, you should know that it is. The initial goal all along with the 340B program was simple: to correct an imbalance created by the passage of the Medicaid Drug Rebate statute. Nothing more. It was designed to simply smooth over that transition and not really affect the healthcare industry and certainly not the insurance industry at all. A new report reveals that “as with most interferences in the free-market, the 340B rule has expanded beyond its bounds”. This, from Secretary of HHS Kathleen Sebelius, as she was leaving her post. What happens now is anyone’s guess.
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