EDITORIAL: The profitable abuse of drugs spawned by government

Compassionate discounts on medicines create the expected boondoggle

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If there’s one thing a government program can be counted on to do, it’s to grow, quickly and a lot. In the last days of the administration of George H.W. Bush, the 340B Drug Pricing Program was created to provide discounted pharmaceuticals to the poor, the uninsured and the most vulnerable.

Such proposals always pass, because no politician wants to appear so cold-hearted as to vote against helping the less fortunate. But once the law, such schemes are detached from the compassion that spawned them. The preferred Washington word is “evolve.”

As with Obamacare, this program become another crony deal delivering big money to billion-dollar corporations.

The idea was to make drug manufacturers provide deeply discounted outpatient drugs to hospitals that serve the underinsured. It’s implied that the discount would go to the consumer, but it doesn’t necessarily work out that way.

President Obama expanded the program by enabling community health centers to contract with retail pharmacies to distribute drugs with the 340B program discount.

This was a sweeping change. The Health and Human Services Department inspector general reported last month that the number of contract pharmacy arrangements increased 1,245 percent.

The investigators found it was easy to game the system because nobody is minding the store against fraud. “Contract pharmacy arrangements,” the report says, “also create complications in preventing duplicate discounts.”

Sen. Chuck Grassley of Iowa and Rep. Bill Cassidy of Louisiana, both Republicans, grew suspicious last year after hearing the phrase “windfall of profit” from the lips of medical center executives.

“When I looked at three North Carolina hospitals’ use of this program,” Mr. Grassley said, “the numbers showed the hospitals were reaping sizable 340B discounts on drugs and then [selling] them to fully insured patients to maximize their spread.”

The poor will not only always be among us, but they’ll always be convenient to the schemes that prey on them, too.

Hospitals and medical centers figured out that they could double dip by getting the discount drugs from the federal government and then be reimbursed by Medicare, Medicaid and private insurance companies for their full price. The difference is pure profit.

Citing Mr. Grassley’s work, the Charlotte Observer reported last year that Duke University Hospital purchased $66 million worth of drugs through the discount program, saving $48 million.

It then sold the drugs to patients for $136 million, making a profit of $70 million. The scheme is so profitable that 2 percent of all pharmaceutical drugs are now sold through the program.

As a nonprofit institution, Duke University Hospital argues that the “profit” goes into providing better medical services, but even so, that’s not so about the big retail pharmacies that get a piece of the action.

To talk about ways to keep the money flowing, a group called the 340B Coalition held a winter conference at the luxurious Hotel del Coronado in San Diego, sponsored by the participating corporations, including Walgreens, the better to find creative ways to assist the poor and indigent with more affordable drugs.

Congress should fix this much abused drug program, or eliminate it.

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