Executive Summary
Drug manufacturers increasingly require 340B covered entities to submit claims through the Enhanced Services Platform (ESP), which was developed by a company – Second Sight Solutions, LLC – with extensive connections to the pharmaceutical industry. The same company has also developed the Beacon platform, designed to be used with the rebate model promoted by manufacturers. The purported justification for these actions is to eliminate double discounting, such as when 340B discounts and Medicaid Drug Program rebates are given for the same prescription.
However, this report argues that the benefits to pharmaceutical companies of mandating the use of industry-connected platforms and imposing a rebate model extend far beyond this stated purpose. Based on government audit data, I estimate the total amount of double discounting to be $3.13 billion annually, with full utilization of Second Sight’s platforms having the potential to recover roughly half that amount. In contrast, I estimate that other sources of value not acknowledged by manufacturers – avoiding paying valid claims, developing derivative data products for lobbying purposes, targeting and influencing health care providers, and selling licenses to data – add up to a much more substantial $9.33 billion per year. This represents over 11% of the total amount of 340B discounts given out annually by manufacturers.
I therefore conclude that the combination of manufacturer-mandated data submission platforms with a rebate model reveal an attempt by the pharmaceutical industry to extract information of value from covered entities without providing compensation. This implies a broader goal of reducing the cost of the 340B program by any means possible, as opposed to merely preventing duplicate discounting. Anecdotal evidence from covered entities’ early experience with Second Sight’s platforms provides additional support for this viewpoint.
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