Pharmaceutical Companies Accuse Hospitals Of Misusing Discounts : Shots - Health News Drugmakers offer medicines at a bargain price to hospitals that treat large numbers of poor patients. Hospitals sometimes resell the drugs at full price and make hefty profits.
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Pharmaceutical Companies Accuse Hospitals Of Misusing Discounts

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Pharmaceutical Companies Accuse Hospitals Of Misusing Discounts

Pharmaceutical Companies Accuse Hospitals Of Misusing Discounts

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  • <iframe src="" width="100%" height="290" frameborder="0" scrolling="no" title="NPR embedded audio player">
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From NPR News that's ALL THINGS CONSIDERED. I'm Audie Cornish.


And I'm Melissa Block. Hospitals and pharmaceutical companies are anxious for a clarification from the government on a discount drug program. In 1992, drug manufacturers were told they had to give hospitals, with a large percentage of poor patients, steep discounts. It was a boon for hospitals. The program has grown tremendously. But drug makers say hospitals aren't using the discounts the way they were intended. Kristian Foden-Vencil has more.

KRISTIAN FODEN-VENCIL, BYLINE: When the first Bush administration set up the drug discount program, it enjoyed wide, bipartisan support. But the name Drug Discount Program must have been taken, because they chose a much more cryptic moniker, the 340B program. It's been a real benefit for patients like David Chance. He turned up at the Oregon Health and Science University Hospital a few weeks ago saying, every time he laid down, it was hard to breathe.

DAVID CHANCE: They put a catheter in the vein of my leg and that goes up to my heart - injected some dye, so they can see the circulation around the - in the vessels around heart.

FODEN-VENCIL: It turns out Chance has an enlarged heart and a valve that doesn't close properly.

CHANCE: I'll be changing my diet and on prescriptions for little while.

FODEN-VENCIL: Those prescriptions include a statin and a blood thinner at a cost of about $125 a month. But Chance works at a Portland area call center and doesn't have health insurance. So OHSU is using is 340B funds to give him his first month of prescriptions free.

CHANCE: That's great. I'd probably be having difficulties affording them, otherwise.

FODEN-VENCIL: This is what the drug companies want - 340 B program hospitals to limit drug discounts to their poor and vulnerable patients. But here's the rub. Instead of passing on drug discounts to all patients, hospitals are selling the medicines at higher prices to their insured patients. Then they use the proceeds to fund clinics, staff and other services hospitals say benefit everyone. They say the law allows them to do that because it's a way to stretch scarce federal dollars. Joe Fazio, the assistant director Pharmacy Services at OHSU, says such drug sales are justifiable in 340B program because some drugs, like those for chemotherapy, can't simply be handed over to the patients. The administration has to be supervised by doctors and nurses.

JOE FAZIO: The ones we're talking about are the ones that are injected into your veins. And they can take several hours for a single course of therapy. And this can happen for five, six days a week for six weeks at a time. So it's very intense. There's side effects - that it's important to have a nurse there and a doctor.

FODEN-VENCIL: But they're reselling all kinds of drugs, not just chemotherapy drugs, says Stephanie Silverman with the Alliance for Integrity and Reform of 340B. It's a lobbying group, made up of drug companies and medical organizations.

STEPHANIE SILVERMAN: That's not what the program was designed for. It wasn't designed to provide other revenues to support the operations of hospitals.

FODEN-VENCIL: About one-third of the nation's 6,000 hospitals are in the 340B program. Drug makers say that slice has ballooned, in recent years, and the program needs to be better controlled. For example, says Stephanie Silverman, many hospitals have been buying up clinics, which haven't qualified for the 340B program. Then they bring them under their umbrellas.

SILVERMAN: Hospitals are not only trying to maximize their own 340B revenues. They're looking to acquire and they are acquiring many community oncology practices - putting them in their system. And by doing so, they can all of a sudden tap into new revenues they couldn't get before.

FODEN-VENCIL: Joe Fazio of OHSU says acquiring doctor practices is an industry trend. And it's one way to be health care costs down.

FAZIO: I wouldn't go so far as to say that there are hospitals gaming the system. But this is an incredibly complex program. I will say that there are institutions out there that maybe don't understand all the rules.

FODEN-VENCIL: But for all the disagreement, both the hospitals and the drug manufacturers agree that the federal government needs to rewrite the 340B rules. For NPR News, I'm Kristian Foden-Vencil in Portland.

BLOCK: This story is part of a reporting partnership of NPR, Oregon Public Broadcasting and Kaiser Health News.

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