Is less transparency and accountability what Ohio needs in healthcare? Some hospital lobbyists think so. They want the Ohio Legislature to expand a federal drug pricing scheme to pad big hospital profits while shielding the program from basic oversight. Their measure, House Bill 276, would make big hospitals richer at the expense of Ohioans.
The 340B Drug Pricing Program was created by a Democrat-controlled Congress in 1992 and later expanded by former President Barack Obama. Its original purpose was to manipulate drug markets in favor of hospitals that served the very poor. This system of price controls was flawed, but at least it was very limited … until Obama’s policies pushed more Americans into medical welfare. Then 340B became a cash cow for big hospitals.
You might think that when hospitals pay less for drugs, they pass the savings on to patients. In fact, hospital executives have made it clear that they see this program as just a way for them to make more money. Many charge patients the full cost of the drugs and never disclose that the hospital has received a deep discount and thus made a windfall profit.
How do we know this? Because conservatives in Congress are investigating and working to reform 340B. Maybe this is why hospital lobbyists are desperate for states like Ohio to pass legislation that ties the state’s healthcare system to the current program? Get enough states tangled up in the current price fixing scheme and reform becomes next to impossible.
U.S. Sen. Bill Cassidy, a physician who is chairman of the Senate committee responsible for healthcare, is investigating hospitals’ use of the 340B program. He has identified “transparency and oversight” concerns that include whether benefits are used for eligible patients, whether patients should receive at least some of the cost savings, and hospitals’ frequent failure even to track 340B revenues.
Cleveland Clinic is among the hospital systems examined by Sen. Cassidy that “do not specifically account for 340B revenue or savings.” Yet the Senate investigation shows that Cleveland Clinic’s benefit from this drug price-manipulation program, over a 39-month period, was $933.7 million.
Where did this money go? According to Cleveland Clinic, 340B savings and revenues just “flow to the Income Statement, like any other expense or revenue.” In other words, hospital executives can use it for whatever they want. Some of it goes to their own paychecks, some to buildings, some to medical programs, some to their vaunted DEI and climate initiatives, and so on.
One place these savings do not go is directly to patients. According to Sen. Cassidy’s report, Cleveland Clinic “explained that it does not pass 340B discounts directly to patients” because the Clinton-era law “was intentionally left general.”
It gets worse. Ohioans with employer-sponsored health insurance, and their employers, wind up paying more for drugs due to 340B. This happens because they lose out on sizable rebates paid to them by drug companies through normal marketplace negotiations about prices. It’s a hidden tax estimated to impose a $275 million cost in Ohio. If House Bill 276 passes, it could increase this cost by another $50 million per year. Again, big hospitals win at the expense of hardworking Ohioans.
The Ohio Legislature has other options to support patients in need and small-town medical practices at risk. Price controls, especially under the federal 340B program, are a big government gimmick – not a solution. Legislators should support federal efforts to rein in 340B abuses and reject House Bill 276.
