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P T. 2010 December; 35(12): 654.
PMCID: PMC3008382

Letter to the Editor

Ted Slafsky, Executive Director

A Clarification On Safety Net Hospitals

I greatly appreciated being interviewed for your recent extensive commentary on the 340B Drug Discount Program’s expansion (“Health Care Reform Bill Expands Access to Section 340B Discounted Drugs for Hospitals,” P&T, November 2010), but I would like to clarify a few points for your readers.

First, the 340B program is not limited to public hospitals. Private nonprofit hospitals such as religious institutions and community hospitals qualify for 340B discounts if they serve a sufficient number of Medicaid patients and have a contract with state or local government to serve the indigent.

Second, the use of the word “pocketing” to describe what participating hospitals do with what might remain of their 340B discounts after billing payers could have given some of your readers an incorrect impression. It’s important to note that 340B hospitals do not make money from their Medicaid and working-poor patients. Most hospitals bill Medicaid at acquisition cost or at a deeply discounted rate and thus they lose money on such patients. They also either give the medicines away to their low-income and uninsured patients or provide them at a significantly reduced price.

Generally speaking, their only revenue stream from 340B is from commercially insured patients, and that is a negotiated rate between the provider and the insurance company. Any revenue so derived helps them to continue their public service mission, exactly as envisioned when the program was established almost 20 years ago.

Thank you again for casting the spotlight on this valuable benefit for safety net hospitals.

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