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New Research Reveals Michigan Hospitals Are Exploiting a Program Meant to Make Medicines Affordable for Low-Income Patients

via Business Wire

New research reveals that Michigan hospitals are making significant profits off a program designed to help low-income patients access affordable medicine without delivering community benefits.

That's among the key findings of an analysis conducted by Dr. Lisa Grabert, visiting research professor of health policy at Marquette University and former senior aide to the House Ways and Means Committee.

“Our analysis exposes a system that is failing Michigan families,” Dr. Grabert said. “Michigan’s so-called ‘disproportionate share’ hospitals are profiting from 340B – a program intended to help vulnerable patients – while leaving those very patients behind.”

At issue is the 340B Drug Pricing Program, which requires pharmaceutical manufacturers to sell medicines at steep discounts to hospitals and clinics that serve large numbers of low-income or uninsured patients. The intent is that these institutions will use those savings to make prescription drugs more affordable for those who need them most.

Dr. Grabert's research demonstrates a different reality. Michigan disproportionate share hospitals (DSH) participating in 340B are reselling those discounted drugs at huge markups and funneling the profits into their investment portfolios rather than patient care and the hospital workforce.

Dr. Grabert’s research was made possible through the support of Community Action for Responsible Hospitals (CARH) – a nonprofit coalition of patient-focused stakeholders including labor unions, faith leaders, healthcare providers, consumer advocates, and public interest groups – as part of its Hospital Spending Watch initiative. The analysis reviewed public data on Michigan hospitals' revenue growth, financial investments, charity care, and workforce pay.

Among its key findings:

  • Hospitals use 340B as a profit engine.
    • Michigan's 340B hospitals reported 49% higher patient revenue, on average, than non-340B hospitals.
    • These hospitals netted an average of $647 million in revenue – nearly triple the $229 million reported by non-340B hospitals.
  • 340B profits are funneled into Wall Street portfolios.
    • Michigan's 340B hospitals invested 113% more revenue, on average, into stocks and bonds than non-340B hospitals.
    • On average, these hospitals invested $55 million, compared to just $13 million by non-340B hospitals.
  • 340B dollars are not reaching low-income and uninsured patients.
    • Despite higher revenues, Michigan's 340B hospitals provided 34% less charity care, on average, than non-340B hospitals.
  • 340B dollars are not reinvested in frontline caregivers or the hospital workforce.
    • Pay rates for employed, contracted, and total workers at Michigan’s 340B hospitals were no higher than at non-340B hospitals.

“Michigan’s 340B DSH hospitals are taking in more money than their peers yet delivering less charity care,” said Dr. Mike Kapsa, Board Member of Community Action for Responsible Hospitals. “Instead of reinvesting in patients, many are funneling funds into Wall Street portfolios. That is not what the program was created to do – and it’s outrageous. These findings show the need for real accountability.”

To read a fact sheet summarizing the analysis, visit: https://carh.info/mihsw

To read Dr. Grabert's research, visit: https://carh.info/grabertmi

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