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Drug-pricing program needs more oversight

By JIM WATERS The Bluegrass Institute

By JIM WATERS

The Bluegrass Institute

We should never discount the unintended consequences of welfare programs, including waste, fraud and abuse that occurs when government decides it's going to provide assistance to needy Americans but fails to include adequate oversight measures.

There's a lot of concern that such accountability is missing when it comes to the 340B Drug Pricing Program - a project created by Congress in 1992 to provide life-saving prescription drugs to the poor and uninsured.

The 340B program established a cost-sharing system whereby pharmaceutical companies provide medications for purchase by eligible hospitals and clinics at discounted rates up to a whopping 50 percent as a condition for having their drugs covered by Medicaid.

The idea is great. The oversight? Not so good.

There is little accountability, for example, in how hospitals and clinics self-report the number of charity care patients they serve.

While providing charity to poor patients is good, too many hospitals have succumbed to the temptation to game the 340B system by taking a big crunchy bite out of the greed-inducing apple in the Garden of Government Assistance Programs while no one is watching.

Hospitals and big-contract pharmacies succumb by purchasing drugs at a deep discount without passing on those savings to uninsured patients. Thus, even uninsured patients are required to pay the full amount.

A recent investigation by the U.S. Health and Human Services Department Inspector General concludes that some providers even use the program to make money in an unhealthy manner on sick patients by buying drugs at a steep discount but turning around and charging the patient and insurance company the full co-pay and reimbursement and then pocketing the difference.

Multiply that by hundreds of thousands of patients annually, and you've got quite the pocket-lining scam.

Red flags also get hoisted when supporters of the deceptively named Patient Protection and Affordable Care Act claim the new law is reducing the number of uninsured even as hospitals report an increase in the volume of patients served by the 340B program.

Drug purchases via the 340B program are expected to more than double - from $6 billion in 2010 to $13.4 billion by 2016 - while the number of Americans without prescription drug coverage will be cut nearly in half.

How do we reconcile this enormous increase in a drug program designed for the uninsured even as Kentucky officials claim to have reduced the number of uninsured by thousands through the new health exchange, and with Medicaid enrollment expected to swell by more than 300,000 new patients as a result of Obamacare?

It's at least curious, if not alarming, that the amount of 340B drugs purchased over the last decade has grown by 800 percent. Shouldn't a large decrease in the number of uninsured at least be somewhat reflected, as well, in a program designed to assist that same group?

Even the Health Resources Services Administration (HRSA) - the agency in charge of the program - agrees that better oversight is needed. The fact that only one hearing has been held in the 22 years since 340B was created is evidence to anyone with an ounce of common sense of the strong likelihood of inadequate oversight.

Credible studies by several government watchdog groups, including the Government Accountability Office, also allege the costly program isn't living up to its intention.

When our government creates programs like 340B and leaves them to operate unchecked for decades, loopholes are found and abused. If even government bureaucrats - including those in charge of 340B itself - claim the effort is flawed, isn't it worth the attention of taxpayers and their elected representatives?

Jim Waters is president of the Bluegrass Institute, Kentucky's free market think tank.

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