Patients are paying the price — literally — for a loophole reducing health care competition in Colorado. Established more than 30 years ago, the once-obscure federal 340B program was intended to help safety-net providers provide care for low-income patients by offering discounted drug prices.

But here’s the catch: while hospitals are expected to provide community benefits with the extra money, it’s not a requirement.

Thankfully, here in Colorado, some hospitals — particularly those in the most rural parts of our state — are using the program as intended to expand charity care, offer more services and ensure patients in hard-to-reach areas are getting the treatments they need.

But sadly, we’ve also seen a handful of bad actors use this loophole to purchase drugs at a discount and sell them at a significantly higher price to insured patients, pocketing the difference. According to one report, just 1.4% of 340B eligible claims show discounts were actually given to patients.

This practice can translate into millions of dollars in additional revenue each year, enabling large health systems to expand service offerings, regardless of demand.

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Meanwhile, participation in the program has exploded. Though the program was originally directed at a small subset of safety-net providers, more than half of non-profit hospitals take advantage of 340B discount drug pricing.

The pursuit of 340B status has also given hospitals unfair leverage to acquire independent providers. Though the 340B benefits apply to health systems, independent care settings — like the community cancer clinic I work in — are not eligible for the program.

It’s simple math the program gives hospitals a competitive advantage over independent practices. The 340B program has spurred increased consolidation as hospitals gobble up independent practices that cannot afford to compete. According to one study, hospital acquisitions of independent oncology practices increased by 9.8% from 2018 to 2020, driven largely by the 340B program’s financial incentives.

Losing access to a trusted independent provider is understandably devastating for patients. But this consolidation is also unnecessarily driving up costs for patients and taxpayers alike. That’s because cancer care delivered in a hospital setting often costs up to three times more than that delivered in an independent clinic.

As a community oncologist, I support the 340B program’s intent: to help patients in need. I also know it was never intended to let hospitals profit off of cancer patients.

That’s why I’m calling on Colorado lawmakers to have an honest conversation on how we restore transparency, accountability and patient-focused care through the 340B program.

My colleagues and I were fortunate to recently visit the Colorado State Capitol and meet with lawmakers interested in shining a light on how hospitals are using their 340B discounts. Two competing bills are being debated — one focused on transparency in the 340B program and the other focused on prohibiting any limitation in the number of pharmacies (most of which are for-profit) a hospital can contract with and, by affiliation, also take advantage of 340B discounts.

The former, Senate Bill 124, would require Colorado hospitals to use 55% of their 340B profits to lower the costs of 340B drugs for low-income patients and 40% to decrease other out-of-pocket expenses for these patients. Additionally, nonprofit hospitals would be prohibited from using 340B profits for certain expenses, including excessive compensation for board members. Such reform would help ensure more hospitals are using the funds appropriately and consequently, more patients are benefitting from the 340B program.

The latter, Senate Bill 71, may have merit in ensuring those hospitals who are good actors and who aren’t profiting off of 340B drug discounts can continue to benefit from the program, but improving transparency and reducing patient costs is the logical place for the legislature to start.

The status quo isn’t working for Colorado patients. That’s why I urge the Colorado congressional delegation and state lawmakers to continue having these important discussions around the 340B program, which will ultimately help put the program back on track, lower spending, and protect patients’ choice in their health care provider.

Leslie Busby, MD, is a medical oncologist and hematologist at Rocky Mountain Cancer Centers.