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Sen. Schumer Calls For End To Hospital Drug Discount Program Cut

U.S. Senator Chuck Schumer speaks at Albany Medical Center Monday.
Jim Levulis

U.S. Senator Chuck Schumer is calling on the Trump administration to reverse cuts to a hospital drug discount program. The Democratic Senate Minority Leader gathered with area health leaders at Albany Medical Center Monday to detail his effort.

Schumer says the 340B program is a vital economic function for the overwhelming majority of hospitals in New York.

“It allows hospitals to purchase prescription drugs at a 20 to 50 percent discount, but they’re reimbursed by Medicare at the same normal rate,” Schumer said. “So they get some extra money.”

The program was enacted in 1992 to help hospitals and other medical centers that treat low-income, rural and uninsured patients.

Schumer says the Centers for Medicare and Medicaid Services imposed a 28.5 percent cut to the program’s reimbursements on January 1, 2018. The Democrat says New York hospitals, including five facilities in the Capital Region, would lose $1.8 billion in funding over the next decade.

“Albany Medical Center will lose $11.5 million in the coming decade,” Schumer said. “Ellis Medicine will lose $23 million. In total, in New York state alone, there will be $158 million in cuts for the year.”

Over the next 10 years, St. Mary’s would lose $7.8 million, Columbia Memorial $1.6 million, and Nathan Littaeur more than $500,000, according to Schumer’s office. More than 700 hospitals, including 26 in New York, wrote to Schumer and other legislative leaders asking Congress to eliminate the cut. Dr. Ferdinand Vendetti is the executive vice president for system care delivery and the hospital general director at Albany Medical Center.

“The 340B program is relatively small in the context of big pharma’s total spend,” Vendetti said. “It’s about 2.5 percent of the $457 billion the annual spend in the United States for drugs. Also, I think very importantly, this is a direct relationship between pharma – the big drug companies – and the providers. Those discounts are provided directly to providers. These means that it operates at little or no cost to the federal government.”

Albany Med says about 20 percent of its patients fall into the low-income population the 340B program is designed for. Vendetti says Albany Med uses funding from the program for its pediatric oncology efforts.

“Having those dollars at risk, to some extent, puts that program at risk,” said Vendetti.

Paul Milton, the president and CEO of Schenectady-based Ellis Medicine, says 65 percent of its patients are covered by Medicare or Medicaid. He says the 340B program enables people to take drugs they wouldn’t be able to afford.

“If they can’t afford the medications, they may not take their medications,” Milton said. “They will end up in our ER. They’ll end up being probably hospitalized. They’ll be sicker and probably in the long run that will end up costing the overall services by Medicare and Medicaid more money.”

Critics say the 340B program lacks federal oversight, has been growing each year and incentivizes hospitals to increase drug costs. With additional charges that hospitals aren’t using savings from the program to assist low-income patients, Schumer says he is open to reforming the program to include restrictions on how health centers can spend the money.

“That’s not why they’re doing it,” Schumer said. “They’re doing it to help the pharmaceutical industry and they’re doing it because they’ve gone after hospitals and healthcare up and down the line.”

Schumer said he is confident Democrats and Republicans will join his call to eliminate the cut.

Jim is WAMC’s Associate News Director and hosts WAMC's flagship news programs: Midday Magazine, Northeast Report and Northeast Report Late Edition. Email: jlevulis@wamc.org
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