Takeaway: While we consider the future for the peaceful transfer of power, Trumpian chaos yields unexpected progress on drug price policy

Editor's Note: This is a complimentary research note published by Healthcare Policy analyst Emily Evans. CLICK HERE to get COVID-19 analysis and alerts from our research team and access our related webcasts.

Trumpian Chaos Not Without Its Benefits & Drawbacks - 08.14.2019 tweet cartoon  1


You always know who is behind in an campaign when they take a turn toward negative messaging. Another clue is a reversal of previously defended positions on hot button issues like public safety or legalization of marijuana, or, in the case of Biden VP possibility, Karen Bass, communism. Suggesting a delay in the federal elections due to COVID-19 outbreak is a first, however. President Trump did just that last week.

COVID-19 has, without a doubt, delivered a special kind of crazy to national politics. It is crazy that the president would bring it up but even nuttier that it was taken seriously enough by the national press corp that they sought comment from Members of Congress.

The COVID-19 era may also be the high water mark for stupid. The president cannot delay an election without getting Congress involved. Further, if a president is not chosen by January 20, the Speaker of the House is seated until a successor is elected, by the House of Representatives if necessary. 

The president's suggestion and the breathless comments by Members of Congress that he may refuse to vacate his chair in January all make additional contributions to the Trumpian chaos that has left the COVID-19 public health response up to the individual decisions of 350 million Americans. As we pointed out in May, there is loads of blame to go around at all levels of government. From inconsistent enforcement of public health orders to prolonged closures of businesses on which American rely for their living, the only reasonable conclusion for most Americans is that COVID-19's risk must be managed at the individual level.

The natural inconsistency that arises from 350 million separate decisions about COVID-19's threat means these months are also marked by some extreme hypocrisy.

One can now be concerned that the president won't cede power while also demanding there be a national response that includes imposing coast-to-coast restrictions on things like interstate travel and prohibiting agricultural workers from harvesting crops. Sounds crazy too but that suggestion was made by a former Administrator of the Centers for Medicare and Medicaid just last week.

It all gives new meaning to the term "silly season" and I am like most Americans, looking forward to spring.


Understandably, it is quite out of fashion to say anything nice about the Trump administration but lost in the cacophony and chaos of its health policy and COVID-19 response are a few things that will have meaningful, long-term impacts. We highlighted one of those last week: telemedicine.

Another is changes to the 340B drug discount program. Health policy is peppered with federal code citations, designed I suppose, to make it as impenetrable to comprehension as possible. For those of you who don't keep copies of the U.S.C. on your bookshelf, 340B is a program through which non-profit hospitals purchase physician administered drugs at a deep discount - anywhere from 33-50% off list price, according to CMS analysis. The hospital is then reimbursed by Medicare and other payers at the list price, keeping the difference. The purpose pf the program is to support the hospital's care of the uninsured and underinsured populations.

The 340B program has had many knock-off effects but one of the most significant has been the incentives it provides for hospitals to acquire physicians' practices, especially those where injectable drugs play a large role in therapeutic responses, such as cancer. A New England Journal of Medicine study from February 2018 associated the 340B Program with 2.3 more hematologist–oncologists practicing in facilities owned by the hospital, 900% more ophthalmologists and 33% more rheumatologists per hospital. 

In 2018, by regulation, the Trump administration lowered reimbursement for Part B drugs (for the non-health policy wonk, read: physician administered) by 30%. Hospitals sued, won at the trial court level but were overturned last week by the Court of Appeals.

The decision, along with threats to hospitals on other fronts like price transparency, COVID capacity limitations and ever diminishing enrollment in commercial insurance, makes all those high dollar acquisitions of doc practices a little upside down, economically.

What happens next could be an epic roll-up, blow-up. Salaries paid to oncologists, opthalmologists and rheumatolgists are, of course, being subsidized by the 340B discounts. Hospitals will have a choice: cut pay or divest the practice, as raising rates seems out of the question. Cuts in pay almost always result in lower productivity as Tom Tobin has pointed out in the context of MD. Divestiture could result in a loss with few interested buyers, aside from private equity, whose valuations are likely to take a hit. There is a back to the future scenario where practices are divested but physicians retain access to certain hospital services and continue to drive traffic to surgical suites.

The court's decision is a positive for HCA and THC, however. In cutting Medicare reimbursement, CMS ordered that the difference between what would have been paid and the new rate be redistributed as an increase in payment for outpatient Medicare services regardless of the taxable status of the hospital.

The playing field between non-profit, or as one health system leader I know calls "non-tax paying," and for-profit gets more level.


If the Appeals court decision isn't enough to lay bare health care's dirty little secret that pharmaceutical sales have been papering over mix shifts to government payers, then consider SNY's decision to withhold shipment of drugs to 340B pharmacies unless they receive claims data as evidence the pharmacy is not getting redundant discounts from Medicaid. SNY's announcement comes after similar moves by LLY and MRK and others are expected to follow.

Duplicate discounts for the same drug are either not permitted or not enabled under federal law and the agency that administers the program, Health Resources and Services Administration, has provided guidance on efforts to combat the practice.

However, while the Trump administration has made an issue of the program and then characterisitcally did not follow through, HHS has looked the other way leaving a relatively uninfluential agency to fend for itself.

Drug manufacturers responded through successive price increases to offset multiple discounts which in turn led to an even greater dependency on the 340B program for hospital operations. 

Facing a very difficult political environment and the economic gravity of fewer commercially insured individuals, the pharmaceutical industry flexed its biggest muscle: access. By limiting access to drugs and forcing either compliance with HRSA or a debate about how much and when discounts are being being allowed, the drug industry may finally bring to bear some limits on what looked for years like an unlimited source of funds for health systems.

It probably won't end well.