The Loophole that’s Made Cancer Drugs Profitable Again

The Program:

The program, known as 340B, requires most drug companies to provide hefty discounts — typically 20 to 50 percent — to hospitals and clinics that treat low-income and uninsured patients…

The Loophole:

The program allows hospitals to use the discounted drugs to treat not only poor patients but also those covered by Medicare or private insurance. In those cases, the hospital pockets the difference between the reduced price it pays for the drug and the amount it is reimbursed…

The Payoff:

When a private oncology practice in Memphis formed a partnership with a nearby hospital in late 2011…


The nation’s new health care law will make more hospitals eligible for the discounts by increasing the number of Medicaid patients they treat, even as the need for the discounts should arguably diminish because fewer people will be uninsured.


Some oncologists say the 340B program is one reason that more than 400 oncology practices have become part of hospitals in the last several years.

Full story on the 340B program in The New York Times.

Comments (4)

Trackback URL | Comments RSS Feed

  1. Ken says:


  2. Studebaker says:

    The number of hospitals and clinics that have access to discounted 340B drugs is expected to increase to something like 20,000 by 2019. I didn’t realize hospitals were allowed to use these discounts on all drugs used on patients other than poor people. This is an example of rent-seeking where hospitals convinced Congress to allow them to redistribute resources from one entity (drug makers) to another (hospitals).

  3. Andrew O says:

    The myraid accounts of corrupt and unscrupulous “loopholes” and incidents like the ones mentioned here in our health care system is so vast that it is impossible to comprehend. Something so complex, yet so easy to fix.

  4. Gabriel Odom says:

    Great, so let’s remind these pharmaceutical companies that they are never going to make a profit, so there is no longer any reason to innovate. It’s not like we are trying to cure cancer or anything.

    Profit is the great incentive to innovate and create new and better drugs – slashing profit is counter-productive to medical research.