Star War fans will always remember when Obi-Wan Kenobi described the spaceport Mos Eisley on the planet Tatooine as a "wretched hive of scum and villainy." It's easy to recall that description when you learn about a conference occurring in Washington, DC this week known as the 340B Coalition. "Scum and villainy" might be too strong a term to describe the conferees but "cronies and rent seekers" wouldn't be.
The 340B Discount Drug Program is a perfect example of a government program gone wrong. Passed in 1992 as part of the Veterans Health Care Act, the program was designed to provide discount drugs to certain health care clinics as a way of serving the poor and underprivileged. In theory, the discounted drugs were to be offered to those in need at the discounted price. Then ObamaCare happened.
ObamaCare included a provision dramatically expanding the number of facilities eligible for the program. What started out as an effort to serve the poor has become a racket -- an income program for wealthy investors who are using it to bilk the taxpayers. Here's how.
Once ObamaCare became law, the number of facilities participating in the program rose from 14,000 to 20,000. Hospitals and other health care facilities realized they could take in the drugs at the discounted rate and then could turn around and bill Medicare and private insurance companies for the full cost of the drugs. The difference would be banked as profit. And profitable it is.
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 off the backs of the taxpayers of $70 million.
Healthcare Corporation of America sold $1 million in bonds to finance marketing of its 340B software program.
Now the pharmacies are getting into the act. The number of single pharmacies operating as a 340B contract pharmacy has grown by 770 percent, from 3,785 pharmacies participating in 2010 to 30,046 in 2013
It's a modern-day crony gold rush and the group has banded together to lobby for an even bigger piece of the pie. This week in Washington, at the Omni Shoreham Hotel, representatives from hospitals, health care clinics and for-profit pharmacies are gathering to " advocate on federal legislative and regulatory issues related to drug pricing and other pharmacy matters affecting safety-net providers."
The goal is to keep this new government funded gravy train rolling and to even expand it during the coming years.
The 340B program was designed to assist the poor and underserved populations that often fall through the cracks. It was not designed to be a tool to pad corporate profits or to rip off taxpayers. Perhaps Obi-Wan Kenobi's description actually is the right one.