In San Diego and across the state of California, patients continue to struggle to afford their prescription drugs. Despite efforts in Sacramento and Washington, DC, to mitigate patient cost and access issues, little has been done to address the flaws in a decades-old drug discount program meant to help low-income and uninsured Californians.
As a result, hospitals are reaping billions in profit from the 340B Drug Pricing Program while vulnerable patients fall deeper into debt. Since its creation, there has been massive growth in the 340B program with little evidence that it is actually benefiting communities in California and nationwide as intended.
It’s beyond time for Congress to find common ground and institute guardrails around 340B to ensure patients are the true beneficiaries of drug discounts in San Diego, across California, and nationwide.
The intent of the 340B program is admirable. The program was designed to enable nonprofit healthcare providers to purchase outpatient prescription drugs at discounted prices and then those providers would use the savings to help low-income and uninsured patients, be it through offering care or medications at low or no cost. Unfortunately, in practice, as hospitals consume provider practices, those same hospitals are also reaping more of the benefit from 340B while patient debt grows.
Today, 73% of people owe debt to hospitals and more than 10% of patients carry medical debt that inhibits other aspects of their life. A 2023 survey of Californians found that two out of three residents report worrying about medical debt, and half of low-income individuals reported having medical debt.
Patients carrying medical debt can see their credit scores drop, impacting their ability to finance a new home or car, and avoid future medical care out of fear of increasing debt. Medical debt has also been linked to adverse physical and mental impacts including an increased risk of suicide. New data has found the majority of patients carrying medical debt are insured.
A Wall Street Journal analysis found that in 2021 billions of dollars in 340B savings were siphoned away to hospitals on top of an estimated $28 billion in tax exemptions. Shockingly, rather than providing relief to patients, some hospitals and health centers are leveraging their participation in 340B to increase executive compensation and expand their networks into affluent communities, boosting services in wealthier communities while failing to serve communities in need.
Data suggest hospitals that joined the program after 2004 are more likely to serve wealthier and insured populations. Between 2011 and 2019, the share of 340B pharmacies contracted by 340B hospitals in the lowest income neighborhoods declined by 5.6% all while the share of 340B contract pharmacies in the highest income neighborhoods increased.
Nationally, in 2021 the average charity care ratio — or percent of a hospital’s operating expenses going toward charity care — hit a 10-year low. The national average of charity care rates fell to just 2.3% in a decade, even while the number of participating hospitals in 340B grew to an all-time high. California ranks below the national average in charity care, with a 2021 charity care ratio of just 1.53%.
As just one example, the amount of charity care that Los Angeles’ Providence Cedars-Sinai Tarzana Medical Center provided in 2022 was just 0.167% of the hospital’s gross revenues that year. Moreover, of Tarzana’s 13 340B contract pharmacies, not one is located in a medically underserved area, as determined by the Health Resources and Services Administration which oversees 340B. On average, eight hospitals within the broader Providence hospital system (which serves California, Oregon, and Washington) had a a charity care ratio of just 0.24%.
The 340B program is a long-standing safety net that is being abused and leaving patients behind with little attention paid to it in Washington. More action is needed to ensure greater accountability and transparency within 340B to guarantee the program is working effectively for the patient communities it was intended to serve.
We commend Rep. Scott Peters, who understands the urgent need to institute reforms that benefit patients here in San Diego and beyond. We stand ready to work with Rep. Peters and lawmakers across the aisle to find solutions that truly benefit patients in need.
By putting greater guardrails around 340B, policymakers can establish stability in the program for nearly 13% of the state’s population who remain uninsured today and other vulnerable patients who need it most. In the absence of action, 340B will continue to grow and be exploited for profits by bad actors in California.
Jen Laws is president and CEO of the Community Access National Network, a national nonprofit organization that works to improve access to healthcare services and supports for people living with HIV/AIDS or viral hepatitis in California and across the country for the last 27 years.
