In the following post, Bret Jackson, CEO of the Michigan Health Purchasers Coalition, explains how 340B is driving up costs for his members and working families across the state – and how proposed legislation would make healthcare more expensive.
The Michigan Health Purchasers Coalition is committed to addressing the rising cost of healthcare, fighting hospital consolidation, and advocating for price transparency and fairness for Michigan businesses and families.
As we pursue reform on these critical issues, it is increasingly clear that there is yet another factor exacerbating these problems and driving up costs for employers and working families in Michigan: the 340B Drug Pricing Program. Unfortunately, the Michigan Legislature is considering bills, SB 1179 and HB 5350, that would raise healthcare costs for Michigan families and perpetuate healthcare consolidation.
Created in 1992 to support safety-net provider hospitals, the 340B program has strayed from its original mission. It allows participating hospitals to purchase medications at a steep discount, in theory helping safety-net institutions better serve low-income and uninsured patients. However, today, it operates as a “buy low and sell high” mechanism for nearly half of Michigan hospitals, in which they charge payers full price for medications and pocket the difference. As a result of its structure as an arbitrage opportunity for corporate healthcare systems, 340B has grown exponentially in recent years, driving up costs system-wide without benefiting the Michiganders that it was initially intended to serve.
As small and large businesses, and unions deeply rooted in Michigan, we believe in the 340B program’s important mission to deliver more affordable access to medicines for low-income patients and communities, but 340B has gone well past the original intent, instead operating as a government-sanctioned price arbitrage system. Stricter guidelines for 340B are needed to protect Michigan families and employer’s bottom line.
Several structural factors in the 340B program cost employers billions of dollars per year without benefiting low-income Michiganders and communities:
- Employer purchasers do not receive rebates or discounts on 340B prescriptions, which increases drug costs for self-insured employers and their workers by 4.2%. This leads to a $5.2 billion increase in annual healthcare costs compared to if employers received typical rebates on 340B prescriptions.
- 340B hospitals have been found to markup prescription drugs at significantly higher rates than non-340B hospitals, and are incentivized by the program to prescribe more, higher-cost medicines and limit the prescription of biosimilars, driving up costs for purchasers.
- Large hospital systems can increase their 340B spread by acquiring smaller, non-340B hospitals or previously independent prescription practices (who are not eligible for 340B), providing strong incentives for consolidation that we know limit choice and increase costs for employers and working families. This consolidation, such as the merger between Spectrum Health and Beaumont Health in Michigan, lead to what the Detroit Free Press labeled “the dawn of the mega merger” in our state.
- These practices are encouraged and exacerbated by the ability of hospitals to partner with networks of external for-profit pharmacies to expand their 340B reach. The majority of these are not located in low-income, rural or otherwise underserved areas, but instead in areas where hospitals can make profits from wealthy patients and their commercial insurance plan reimbursement.
Altogether, it’s clear that purchasers and working families in Michigan are paying more for health care as a result of 340B abuses, and reforms are desperately needed to bring transparency and protect the communities it was initially created for.
We urge Michigan legislators to oppose SB1179 and HB5350.
To learn more about the impact of 340B on employers and opportunities to advance policies to help reduce its inflationary impact on healthcare spending in Michigan, we encourage you to explore the National Alliance’s 340B page on their website.
