Three North Carolina Hospitals Questioned About 340B Profits

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When interviewing healthcare executives, HCE frequently hears the terms “accountability” and “transparency” used and what the government expects from them with increasingly intense scrutiny. This next story may be a difficult pill to swallow, especially considering the lack of accountability and transparency to which Congress is held.

U.S. Sen. Chuck Grassley, R-Iowa, is questioning the millions of dollars reaped by three North Carolina nonprofit hospitals from the federal 340B discount drug program for the poor and uninsured, reports Ames Alexander, Joseph Neff, and Karen Garloch of the Charlotte Observer.

As the authors relate, “Hundreds of U.S. hospitals, including more than 40 in North Carolina, obtain deep discounts on outpatient drugs under a rapidly growing federal program called 340B. The plan requires drug manufacturers to cut prices to hospitals that treat large numbers of financially needy patients.”

Grassley isn’t necessarily questioning the program itself, but whether it is “functioning as intended” at Duke University Hospital, Carolinas Medical Center, and UNC Hospitals.

“Last year,” the authors write, “Duke University Hospital purchased $65.8 million in drugs through the discount program, which saved $48.3 million. It sold the drugs to patients for $135.5 million, for a profit of $69.7 million. The profit would have been $21.4 million if Duke had not participated.”

CMC isn’t engaging the senator with facts and figures, simply saying, “It is very difficult…to accurately calculate gross or net revenues from outpatient pharmaceuticals due to many factors, including the complicated reimbursement models for pharmaceuticals.” Grassley, however, has demanded specifics from CMC, giving them until last Friday to respond.

Meanwhile, Charlotte revealed “it was able to save about $21 million from its participation in 2011–up from about $13 million in 2008.”

According to the article, “Congress set up the program to offset the cost of treating Medicaid patients, but hospitals can buy discounted drugs for all outpatients, including those with private insurance.” Of the patients given discounted drugs by Duke, 67 percent were under commercial insurance companies, “which often pay hospitals many times over cost for medications.” At CMC, the number of 340B patients with commercial insurance in 2011 was roughly 42 percent.

The hospitals defend themselves by saying “they’ve used savings from the discount drug programs to better serve those in need.”

CMC’s parent, Carolinas HealthCare System, “said it passes the savings on to many uninsured patients, including those who visit its community clinics, where uninsured patients are charged no more than $10 for any prescription. Those savings also have helped increase access to cancer-infusion centers for the poor and uninsured,” while “Duke said 340B has helped it operate several programs that benefit the needy,” including its nonprofit patient-care mission. “UNC said it has invested the 340B savings to provide ‘free drugs to our thousands of charity care and uninsured inpatients and outpatients and extend limited resources to a broad patient population.’”

If you’re an executive from one of these organizations, we would welcome your comments on Grassley’s inquiry. Is it fair? Is he overreaching?

If you’re from another system, how do you use the savings from the 340B program? Does Grassley’s inquiry make you afraid that the government will start questioning your investment of the savings?

-by Pete Fernbaugh

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