There are times when more isn’t better. It’s just more.
This is one of those times.
Democratic legislators are pushing Senate Bill 5981, which would expand a little-known federal drug discount program called 340B. The problem is that the program is not consistently serving the people it was intended to help; it’s already growing at a staggering pace, and further expansion could increase health care costs for Washingtonians.
The 340B program requires pharmaceutical manufacturers to sell drugs at significant discounts — in some cases, extremely steep discounts — to hospitals and clinics serving large numbers of uninsured and Medicaid patients. Giving those in need a helping hand is a worthy goal.
Congress created 340B to stabilize rural and safety-net providers serving underserved populations, and prescription drug makers were integral in establishing the initial program. Yet today, much of the program’s financial benefits are concentrated among large urban health systems. In Washington, that often means institutions in King County and the Seattle metro area — including major academic systems — capturing significant 340B revenue. At the same time, smaller rural hospitals continue to struggle to maintain services and keep their doors open.
Here’s where concerns arise. There is no requirement that 340B discounts be passed directly to low-income patients. Once a hospital qualifies to participate in the program, it can use the discounted drug pricing for any eligible patient, regardless of income. A hospital may purchase a drug at a steep discount and then bill the patient or their insurer — including the state’s Apple Health Medicaid program — at standard reimbursement rates, which are much higher.
Hospitals argue that revenue generated through the program helps fund uncompensated and charitable care. But research has raised questions about whether the growth in 340B revenue consistently translates into higher levels of charity care. National analyses have found that some 340B hospitals provide charity care at levels comparable to — or, in some cases, lower than — those of non-340B hospitals.
In Washington, charity care represents a small percentage of overall hospital operating expenses, even among 340B participants. At the same time, many large health systems continue to expand assets, marketing budgets, and capital projects. Yet there is no clear statutory requirement that hospitals publicly document exactly how 340B revenue is spent.
Meanwhile, the program has ballooned over the past 15 years. Since 2010, the number of contract pharmacy arrangements has grown dramatically, expanding far beyond the program’s original footprint. If that trajectory continues, 340B will rival other major federal drug purchasing programs in size.
Despite its origins in supporting underserved communities, only a portion of participating pharmacies in Washington are located in rural or medically underserved areas. That raises a fair question: Is this really a program that needs state legislation to grow even larger before meaningful accountability measures are put in place?
New national research has also examined pricing patterns at some 340B hospitals, suggesting that markups on certain drugs can significantly increase costs to insurers and public employee health plans — costs that ultimately fall on taxpayers and working families.
In some cases, hospitals will prescribe expensive name-brand drugs in lieu of generic equivalents because they make more money through 340B discounts on expensive drugs than on cheaper, generic drugs. The result is that drug makers sell drugs at a huge discount, but patients still pay full price, with the hospital profiting from the price difference rather than the patient seeing any specific benefit.
Washington residents shouldn’t be paying more for health care without clear transparency and accountability. Over the last decade, the number of formal audits of program participants has been limited relative to the program’s rapid expansion, even as oversight reports have identified compliance concerns.
Increased accountability and transparency in health care shouldn’t be a partisan issue. If 340B is to continue growing, lawmakers should ensure it truly benefits the underserved patients it was designed to support — including those in rural communities — rather than simply becoming a revenue stream for large urban systems.
Rep. Matt Marshall, R-Eatonville, represents the 2nd Legislative District.
