UCHealth University of Colorado Hospital was recently ranked No. 1 in the state by U.S. News and World Report.
The trade group of Colorado hospitals is preparing for a political battle at the state Capitol to maintain a federal drug discount program that the group says benefits nearly 70 hospitals statewide.
Critics of the program known as 340B argue it has been widely abused and misused, particularly by large hospitals.
While it is a federal program, Julie Lonborg, senior vice president of Colorado Hospital Association, said her group will turn to the Colorado state legislature next year to push legislation to protect hospitals from losing funding. The program, she said, is under attack by the pharmaceutical industry.
The group and officials from several hospitals hosted a virtual roundtable on Dec. 10 to discuss maintaining funding they argued is needed to keep hospitals on track. In the meeting organized by the trade group, Lonborg said 68 of the state's 88 hospitals qualify for the 340B program.
The federal 340B Drug Pricing Program, established in 1992 as part of the Public Health Service Act, allows eligible healthcare organizations to purchase outpatient drugs at a discount from manufacturers.
In an email to Colorado Politics, Cara Welch, the group's communications director, said protecting 340B is a priority. No legislation has been drafted yet and no sponsors at the Capitol have been named, Welch said.
Welch said that, since 2020, pharmacies have started limiting hospitals' participation in the program, adding that states have oversight, though 340B is a federal program.
Last month, a three-member panel attended a healthcare forum in Denver said large hospitals are abusing the program that is supposed to help pay healthcare costs for low-income families. The panel said fixing the program cannot happen at the state level, maintaining Congress must fix it.
During the Nov. 12 forum, William Smith, a senior fellow at the Pioneer Institute, said pharmacy benefit managers (PBMs) and large hospitals have learned how to profit from the program.
For example, a cancer drug costing around $200,000 is only $25,000 for hospitals with 340B status. However, the hospital is still billing insurance companies for $200,000 and "pocketing $175,000 in profits," he said.
"That's really what's driving this program -- is the ability of hospitals to arbitrage the discounts," Smith said. "And what's happened is hospitals have gone out into wealthy neighborhoods and have purchased physician practices, particularly physician practices that prescribe high-cost drugs, like rheumatologists or oncologists, and they bought them up so that they could charge more to the discounts for profit."
Critics also said the program has become mismanaged and underregulated due to staff shortages at the Health Resources and Services Administration, which oversees it.
Others said hospitals have not been transparent about using 340B funding.
Courtney Christian, deputy vice chair of policy and research for PhRMA, said the solution is not be to eliminate the 340B program because it has value to hospitals when applied correctly, noting that its primary purpose is to help patients in need and support charitable programs.
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The hospital association said keeping the program is vital.
The main question is whether state lawmakers would make changes or leave the issue completely up to the federal government.
"The powerful pharmaceutical industry has mounted a coordinated national effort to weaken 340B, even though this discount program accounts for 3% of the drug companies' profits globally," the association said. "Despite the minimal impact to pharmaceutical companies, 340B is an essential lifeline for 68 participating Colorado hospitals with; 89% of which operate with low or negative margins."
Meanwhile, Kevin Forbush, the 340B program director at Intermountain Health in Brighton, said he disagrees with the assertion that the program does not have oversight, noting he has taken part in audits for the last 10 years.
"This is a highly regulated program that's administered by the federal government, Forbush said. "I, myself have been through six of these audits. They are very intense."
Forbush described a system where hospitals must undergo a process to meet stringent criteria. Under the 340B program, a patient who needs blood thinner medication pays 28 cents when the regular cost is $500; hence, the 340B program, which aims to bring down drug costs, works, he said.
Chris Thomas, the president and CEO of Community Hospital in Grand Junction, said hospitals are already operating on thin margins, and "340B funding for us is absolutely critical."
For some hospitals barely operating in the black, hospital officials say losing funding could force them to operate at a deficit.
UCHealth Vice President Dan Weaver said that UCHealth is the state's largest MedCaid provider and that it continues to see the number of uninsured patients grow.
"340B is extremely important to us," he said. "Not only do some of the of our hospitals qualify for 340B because of the amount of uncompensated care that they provide, but 340B makes that uncompensated care possible."
Being in an urban community, Thomas said the Community Hospital is five miles from another hospital and considered too big to be a critical access facility. With 340B funding, Thomas said, the hospital has invested in a better OB and midwife program.
"We embed our midwives," he said. "They go into our safety net clinic on a weekly basis and see patients on a sliding scale. We know that giving prenatal care early and often saves money, saves lives and improves the health of our community."
At the November forum, Jonathan Campbell, the chief science officer for the National Pharmaceutical Council, said those who are abusing the 340B program are costing the healthcare industry an estimated $5 billion.