Forbes Fumbles Facts On Important Drug Discount Program

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Gil Gutknecht Former Member of Congress
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I have long been an admirer of Steve Forbes and the vaunted publication founded by his father. No family or periodical has more consistently fought for free market principles. So, I am perplexed by a recent contribution to Fox News in which he commingled the need for market principles and transparency in health care with the 340B drug discount program. Surely, he is not suggesting that a program which helps struggling clinics and hospitals stretch precious resources is the real cause of outrageous drug prices in the United States?

It is tempting to conclude that this is yet another example of the undue influence that big Pharma has as a result of their massive lobbying and advertising budgets. But, I have too much respect for Mr. Forbes to suggest that this would cloud his judgement.

I have written and spoken extensively on some of the issues he raises. I strongly agree with most of his postulates. We do need more market forces to control health care costs. Free markets work every time they are tried. Markets require price transparency and real competition. Neither exists today, especially in pharmaceutical pricing. But, I strongly disagree with his conclusions. By the way, transparency and real competition are the last things the powerful drug industry wants. They have blocked every effort in Congress to require big Pharma to share how they determine prices and they even have blocked efforts to allow purchasers in the 340B program to verify that they are not being overcharged.

So, I’m left to conclude that he is unaware of the various ways that the pharmaceutical industry uses its market power to buy political power to increase its market power. Any objective observer would conclude that they have used both to bend the rules and skirt the antitrust laws to impose predatory pricing on defenseless Americans. And clearly he doesn’t really understand the origins of the 340B program and how it works. The 340B program is one of those rare government programs that actually keeps health care prices down for patients.  Hospitals utilize the savings from the program to provide free or low-cost medicines to low-income, underinsured and uninsured patients.  And despite the drug industry’s rhetoric, the discounts that these Fortune 500 companies provide make up only1.3 percent of the $457 billion U.S. drug market.

Mr. Forbes is correct that under Obamacare (which Big Pharma lobbied for) the 340B program was expanded to include rural hospitals. But, I doubt that he understands how important these hospitals are out here in fly-over country and how they struggle to keep their doors open. The modest savings they get on drugs can mean the difference of whether they can keep their doors open and to maintain minimum staffing and services for our most vulnerable Americans.  And the hospitals in urban areas that participate in the program must meet a very high threshold of poor patients (30 percent) to even qualify for the program.

He is also correct that there has been too much consolidation in health care. It is indeed reducing competition. But, the driving force behind much of this is government regulations and exorbitant drug prices, not the 340B program. Any consolidation between hospitals and doctor’s practices is dwarfed by the massive mergers among the giant pharmaceuticals. Could it be that the $100,000 price tag for cancer treatments is the root cause for cancer specialists wanting to come in house?

I seriously doubt that Mr. Forbes understands the hoops that hospitals must jump through to qualify for 340B. They must meet strict standards and are subjected to burdensome audits. He probably doesn’t know that 340B hospitals provide $24 billion annually in uncompensated care. The patients that are served by 340B hospitals have few options and these hospitals stand in the breach. I am proud of U.S. Rep. David McKinley (R-WV) who is willing to take on the drug industry swamp and stand with his rural hospitals. He has introduced legislation (H.R. 4392) that would block ill-conceived Medicare regulations that could decimate this important program.

If Mr. Forbes is really serious about greater transparency, he can lead by example. Forbes regularly publishes lists. He can publish the suggested U.S. retail prices for each of the top 50 drugs – what they sell for in Canada, France and perhaps Japan-and what the company spent to develop the drug. He might also include what American taxpayers spent on the development. This would be a great public service. Sadly, the drug industry has fought tooth and nail to keep all of that information a trade secret.

Once Americans are being charged prices that look more like the prices charged in the rest of the industrialized world, we can have a discussion about why we need programs like 340B.  But, let’s deal with the abusive prices being charged by the drug industry first.  Mr. Forbes can get that ball rolling with his next issue.

The Honorable Gil Gutknecht (Republican) served in the U.S House of Representatives representing a rural district Minnesota from 1995 to 2007.

The views and opinions expressed in this commentary are those of the author and do not reflect the official position of The Daily Caller.