The 340B discount drug program and supply chain leakage

An article in the New York Times (February 12, 2013) describes problems with the 340B drug program that requires pharmaceutical companies to provide 20 to 50 % discount to hospitals treating low income and uninsured patients and accounts for about $7 billion worth of drugs (including 33 % of the hospitals). But some of these clinics buy their entire volume at such discounted prices and then charge a markup to those covered by private insurance. This “leakage” of the discount is considered to be an abuse of its intent, claim pharmaceutical companies and pharmacies. But others claim that this extra income enables these hospitals to treat poor patients by covering their operating costs. Should drug discounts be tied to the patient record, thus tracking payments to the uninsured person covered ? Does the argument that the extra margins support operating costs, while not true to the intent of 340B, an acceptable argument or are such practices fraudulent ? More generally, given the leakage of promotions in retail in general, should such observed practices be considered a cost of doing business for pharmacies ?

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About aviyer2010

Professor
This entry was posted in Global Contexts, Operations Management, Supply Chain Issues and tagged , , , , , , , , . Bookmark the permalink.

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