The same argument has recently been made by Ike Brannon and Anthony Lo Sasso Health matters at the forefront Article. 340B allows hospitals serving low-income communities to purchase pharmaceuticals at discounted rates, but then receive full price reimbursement from payers (e.g., commercial insurers, Medicare). It is not clear that the 340B program also benefits low-income patients. The author writes:
Importantly, the program does not require hospitals or clinics to provide patients with a 340B waiver. Instead, participating providers can purchase drugs at deeply discounted prices while continuing to bill insurers, including Medicare and private payers, at standard reimbursement rates. The resulting expansion increases hospital revenues without the obligation to reduce patient costs or expand access.
The authors claim that 340B acts as a tax expense. What is tax expenditure?
Tax expenditures…provide financial benefits through exclusions, deductions, or exemptions that reduce tax liabilities.
An example of a tax expense is employer-provided health insurance. These benefits that employees receive are tax free – whereas income earned from the same job is certainly not tax free. Another example is the mortgage interest tax deduction. So why would 340B be a tax expense?
As the volume of discounted sales increases, manufacturers’ profits decline, reducing their federal tax liabilities. Increasing access to care does not compensate for these harms; Instead, they submit largely non-profit, tax-exempt hospitals as higher [hospital[ margins…
Former CBO Director Crippen has estimated that reduced pharmaceutical profits associated with 340B could lower federal tax revenue by as much as $200 billion over the next decade, which puts it not in the top tier of currently recognized tax expenditures, but comparable in magnitude to the tax preference for traditional individual retirement account contributions.In effect, 340B functions as a mandated transfer from taxable firms [pharmaceutical manufacturers] For tax-exempt entities [hospitals]…
Who cares? Why does it matter to classify 340B as a tax expense? the author says so
Tax expenditure is regularly scrutinized by policymakers and government bodies around tax reform and the budget deficit; Specifically, reclassifying 340B as a tax expense would require an annual estimate of the program’s revenue cost.
You can read the full article here.
