by Brittany La Couture
American Action Forum
June 17, 2014
Background Paper
The 1990 Medicaid Drug Rebate Program required drug manufacturers to include Medicaid in the ‘best price’ offered to any other health insurance provider, but contained no exception in the ‘best price’ calculation for charitable giving. Before the statute was passed, many drug manufacturers donated prescription drugs to health care facilities for low-income patients. However, under the 1990 statute, if a drug manufacturer donated drugs to any health care facilities it would be obligated to offer the drugs at that same price – that is, no charge – for all Medicaid patients. Charitable giving constricted; low-income patients suffered. In 1992, Congress created the 340B program to address this problem, mandating discounts to health care providers serving low-income patients. 340B has problems of its own. It no longer only services the needy, has failed to replace charitable giving, and distorts a larger share of the market with every passing year.

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