Schumer: Albany area hospitals to lose $44M in drug discounts

U.S. Senate Minority Leader vows to restore cuts to 340B drug pricing program

ALBANY — U.S. Sen. Charles Schumer stopped by Albany Medical Center on Monday to decry recent cuts to a little known drug-pricing program that area hospitals say are making it harder for them to serve needy populations.

The federal 340B Drug Pricing Program was enacted by Congress in 1992 and allows hospitals that serve a disproportionate share of low-income and uninsured patients to purchase drugs at a 20 to 50 percent discount, while keeping their Medicare reimbursements at non-discounted levels. The extra reimbursement money, in theory, provides a financial "safety net" to hospitals whose patients are more at risk of getting sick and less able to afford it.

But criticism of the program has grown in recent years, with lawmakers and several studies noting that the eligibility criteria is too expansive and that some hospitals are pocketing the profits rather than reinvesting them into improving care. Other studies show it's led to increased supply of certain drugs, and incentivized providers to choose more expensive drugs.

In November 2017, the Trump administration announced plans to scale back reimbursement rates under the program, and a 28.5 percent cut in reimbursements took effect in January 2018.
"This was a great program and no one complained about it, except maybe the pharmaceutical industry," said Schumer, a Democrat. "But they seem to have a lot of sway in Washington with this administration."

Participating Capital Region hospitals insist they never used savings to line their own pockets. Instead, they said, the money was used to bolster pediatric cancer and outpatient infusion services at Albany Med, drug coverage for Medicaid recipients at Ellis Medicine in Schenectady, and maternal and mental health care at Columbia Memorial Hospital in Hudson.

Other area hospitals that receive discounts include St. Mary's Healthcare in Amsterdam and Nathan Littauer in Gloversville.

"No one went home and put money in their pockets," Schumer said. "These are nonprofit medical institutions... they expanded medical care, they were able to hire that extra nurse or doctor, they were able to buy a machine that would save lives."

The slashed reimbursement rates are poised to hit Ellis the hardest.

The Schenectady-based hospital system will see $23 million in lost savings over the next decade under the cuts. Albany Medical Center will lose out on $11.5 million over the same period, followed by St. Mary's Healthcare at $7.8 million, Columbia Memorial at $1.6 million and Nathan Littauer at $503,000.

Statewide, participating hospitals are poised to lose out on nearly $1.8 billion in prescription drug discounts. So far this year, they've lost out on $160 million worth of discounts.

This month, Schumer received a letter from more than 700 hospitals, including 26 in New York, asking for his help to reverse the cuts. On Monday, he vowed to do just that, and added that he's heard from many hospitals that are more than happy to provide increased accountability as to how they spend the drug savings.

"We can deal with increased reporting requirements," said Dr. Ferdinand Venditti, executive vice president for system care delivery at Albany Med. "We're not opposed to those."

Although the cuts were touted as a way to bring down drug costs, which are a real and significant problem in the U.S., Venditti said they're more likely to profit the pharmaceutical industry and lead to increased costs elsewhere in the health care system.

Smaller drug discounts means fewer patients who are able to afford them, said Paul Milton, president and CEO at Ellis Medicine.

"If they can't afford them, they may not take them," he said. "If they don't take them, they end up in our ER. They'll be sicker and I think in the long run it's going to really harm communities — particularly communities like Schenectady that are trying to serve the underserved."

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