A Win For Drug Companies Leaves Taxpayers Holding The Bag

Cathy Reisenwitz Editor-in-Chief, Sex and the State
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While drug company executives are enjoying rapidly escalating medicine prices, hardworking Americans are watching more and more of their paychecks disappear every month at the pharmacy. There’s a largely unknown program that helps people who fall through the health-insurance and Medicaid cracks to be able to afford their medications. But drug manufacturers want to gut it, leaving taxpayers with the bill.

The fastest growing part of the nation’s health care budget is prescription drugs. They’re eating up $1 of every $5 spent on employer health insurance benefits. Prescription drug spending in the United States was about $457 billion in 2015, or 16.7 percent of overall personal health care services.

For this reason, opinion polls routinely show drug prices as a top issue the public wants addressed. Strong majorities of both Democrats and Republicans cited “making sure that high-cost drugs for chronic conditions … are affordable to those who need them,” as their top health priorities in an October Kaiser Family Foundation poll. And majorities of both parties want “government action to lower prescription drug prices.”

For some people who can’t afford their medications, the 340B drug discount program is a lifesaver. It requires pharmaceutical manufacturers to provide discounts on drugs to nonprofit and public hospitals that serve lots of poor people.

It was begun in 1992, and expanded with the passage of the Affordable Care Act to small rural providers. It’s estimated that a third of US hospitals participate. Also in the program are thousands of community health centers, Ryan White AIDS clinics, and hemophilia treatment facilities.

Now drug manufacturers are fighting to significantly curtail 340B. Without access to reduced-price medicines, many health organizations will have to cut back care, others will close their doors.

Some of the people who were getting treatment through these organizations will likely die. The rest won’t fill their prescriptions and will end up back in the hospital even sicker than before.

Because many of these hospitals are public, it’ll be on the taxpayers to pick up the tab. And many of these sick patients will turn up again in emergency rooms, a huge unnecessary cost that weighs down the entire healthcare system. Increasing medication adherence could save the U.S. healthcare system $290 billion per year, according to the Network for Excellence in Health Innovation. U.S. hospitals spend $100 billion per year on excess hospitalizations alone.

Some would have you believe that 340B is a big-government program. But it’s not taxpayer funded. The program is administered by the federal government, so it has a small budget for that.

The estimated $4.5 billion in annual savings generated through 340B comes indirectly from the drug industry, which can definitely afford it. And technically the government does not force participation by manufacturers.

Cutting 340B will not result in smaller government, but likely the opposite, as municipalities are forced to pick up the slack left by drug manufacturers chasing bloated bottom lines.

Not a great proposition for sick and low-income individuals, and not a great proposition for fans of smaller government either.