Small town pharmacy (source: Pixabay)

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In the midst of a global pandemic, pharmaceutical companies are threatening to stop giving discounts on drugs to rural hospitals – a policy that has helped many of them survive, advocates say. 

The policy, called the 340B Drug Pricing Program, requires drug companies to sell discounted prescription drugs to Critical Access Hospitals. These hospitals – based in rural and hard-to-serve communities – use these savings to lower patients costs and help their bottom line, says Brock Slabach, senior vice president for member service at the National Rural Health Association. 

Out of necessity, many rural hospitals contract out their pharmacy services with one or more pharmacies in their coverage area. These contract pharmacies then receive the discounted drug prices on behalf of the hospital. 

In a letter dated September 1, Eli Lilly announced that it would no longer be providing discounts for products shipped to a contract pharmacy, with the exception of insulin, similar to what AstraZeneca and other drug manufacturers had done in the months before. Pharmaceutical manufacturers will limit the number of contract pharmacies a hospital can have to one. The changes implemented by the pharmaceutical companies, Slabach says, could disproportionally hurt rural hospitals. 

“These critical access hospitals are in communities were one hospital may provide care to four or five communities,” he says. “If they have to limit it to one (pharmacy), how do they choose which community they locate their pharmacy in?” 

Not having those lower drug prices could have a number of consequences, he says. Rural residents could choose to go to other pharmacies, of course, but without the lower prices, those rural residents, who tend to be older, poorer and sicker, may not be able to afford their medications, he says. Some may stop taking their medication, causing their conditions to worsen. 

The financial health at rural hospitals is also on the line. At Lexington Regional Health Center in Lexington, Nebraska, the 340B program is a significant factor in the hospital’s financial stability. 

“The 340 B program provides us the revenue necessary to provide services to the community,” said hospital CEO Leslie Marsh. “We are similar to most (Critical Access Hospitals) in that 340B is critical to our ability to keep our doors open, allowing us to reach the underserved populations we all serve.”

About a third of the patients at Lexington Regional are uninsured or underinsured. The hospital provides between $1.5 million and $2 million in uncompensated care a year, Marsh said.

“Through this program we maintain a budget neutral or slightly positive margin,”  she said. 

The director or pharmacy at Lexington Regional, Rael Woehrle, said the hospital would lose about 40% of the revenue it uses to keep its doors open. In some cases, the loss of the 340B drug pricing program wouldn’t just eliminate the discount but force the hospital to take losses on some prescriptions.

In a memo to staff, Woehrle said she compared the price of similar prescriptions before and after Eli Lilly changed its 340B pricing. 

“I found one prescription [where] we made $484.66 in August and actually lost $93.51 in September,” she reported. “Another prescription we generated $610.63 in revenue in August and lost $38.23 in September (a negative $648.85 in revenue).  … We have not only lost all revenue we generate through our contract pharmacy prescription refills to our patients, but it is now costing us money.”  

Organizations like the National Rural Health Association have organized letter-writing campaigns to urge Health and Human Services Secretary Alex Azar to do something, Slabach says. 

On September 17, nearly 30 U.S. senators sent a letter to Azar urging him to address the pharmaceutical companies’ changes to the rules for the 340B program. The letter said healthcare providers were already struggling with revenue losses because of Covid-19. 

“As these threats to the (340B) program progress, we fear the potential exacerbation of these shortfalls in resources for providers at a time when they are needed most,” the letter stated.

Senator Thom Tillis (R-North Carolina), one of the letter’s signers, said the program needs reform, but not at the cost of rural residents’ access to medications. 

“While I believe reforms to the 340B Drug Pricing Program are necessary for its long-term viability, pharmaceutical companies must follow the program’s rules and ensure our most vulnerable communities have access to affordable medication, particularly as we continue to battle Covid-19,” Tillis said in a post on his website. 

Healthcare organizations across the country say without action at the federal level, rural lives are at stake. 

“Recent threats to the 340B drug discount program are jeopardizing our health care providers’ ability to provide affordable medications and care for the most vulnerable patients, putting health centers’ operations at risk – especially in rural North Carolina communities,” said Chris Shank, CEO and President of the NC Community Health Center Association.

Azar, to date, has not responded.