New York urged to avoid increasing healthcare costs
A federal prescription drug discount program designed to assist underserved patients has come under scrutiny for being exploited by major hospitals to increase healthcare costs for employers and working families, ultimately failing to aid the intended beneficiaries. A recent report by the American Benefits Council, titled “Growth Unchecked,” highlights the urgent need for policymakers to address the hidden costs associated with the 340B Drug Pricing Program and initiate targeted reforms to curb its unchecked expansion.
The 340B program, although unknown to many, including most New Yorkers, affects anyone with employer-sponsored health coverage or those funding public-sector health plans. A provision in the New York State Senate’s one-house budget proposal could further entrench the opacity of the 340B program, enabling its expansion at the expense of employer-sponsored health plans, which could lead to higher costs for working families.
Instead of masking the program’s fiscal impacts, the Legislature is urged to implement reporting measures that would clarify how hospitals utilize their 340B revenues. This heightened accountability and transparency is essential not only for informing state actions but also for guiding Congress as it seeks to modernize the program and ensure its intended benefits reach vulnerable populations without escalating healthcare costs.
Originally, the 340B program aimed to empower safety-net providers to deliver care to uninsured and underserved patients by offering medications at reduced prices. However, it has evolved into a significant profit generator for large hospitals. These facilities acquire drugs at steep discounts and then bill health plans at full price, thus profiting from the difference.
The financial stakes are considerable. Hospital purchases through the program surged from approximately billion in 2010 to an astonishing billion by 2023, mainly owing to increased contract pharmacy arrangements. Alarmingly, many of these contracted pharmacies are located in affluent areas, leaving behind socioeconomically disadvantaged neighborhoods where the need for care is greatest.
The unchecked growth of the 340B program contributes to rising healthcare costs by promoting high-priced medications and facilitating hospital consolidations that shift care to more expensive venues. A recent analysis from IQVIA revealed that state employee health plans faced approximately million in annual “upcharges” associated with the program, translating to an average of 7 in increased spending per patient, not to mention a 146% markup on drugs.
With expanding 340B provisions likely resulting in pricier coverage, higher deductibles, and increased out-of-pocket expenses for families, the implications do not align with Governor Hochul’s administration’s stated goals of making healthcare more affordable.
As budget discussions progress, it is essential for the governor and lawmakers to reconsider any language advocating for the proliferation of the 340B program. Instead, the focus should shift towards enhancing healthcare affordability and ensuring that any reforms genuinely benefit those most in need. Employers still support the original intent of the 340B program and are advocating for reforms that redirect the benefits to patients rather than large healthcare systems that currently monopolize the advantages. The absence of enforceable regulations mandating that 340B revenue go toward assisting patients underscores the critical need for systemic reform within the program. As healthcare policy evolves, ensuring accountability and prioritizing patient welfare should remain paramount.
