In a recent op-ed piece for the Wall Street Journal, Dr. Scott Gottlieb, a fellow at the American Enterprise Institute, makes a convincing argument on how expansion of the 340B drug program under Obamacare actually hurts cancer patients.

Dr. Gottlieb explains:

Under 340B, eligible hospitals are allowed to buy drugs from drug companies at forced discounts of 25% to 50%. The hospitals can then bill government and private insurers for the full cost of the drugs, pocketing the spread. The arrangement gives 340B-qualified hospitals a big incentive to search for patients and prescribe lots of drugs. The costlier the drugs, the bigger the spread. So expensive cancer drugs are especially appealing.

When this program started in 1992, only 90 hospitals qualified for the program because of their indigent patient populations. As of 2011 the number of qualifying hospitals has shot up to 1,675 or a third of the total number of hospitals in the United States. The 340B program has become a “cash cow” for hospitals, and not necessarily the best thing for cancer patients. As hospitals acquire more private oncology practices, cancer treatment is increasingly done in a hospital setting, which is far more inconvenient, uncomfortable and expensive for cancer patients. To add insult to injury (literally!), only 1 in 20 patients are technically indigent enough to be the intended recipients of this program’s benefits.

Don’t think for a moment that drug companies haven’t taken notice of this development. Since their drugs are automatically discounted, the deep discount is thought of an additional cost, and the cost is therefore escalated.

Dr. Gottlieb tartly observes,

To combat this sort of gaming, drug makers are tightening how they distribute cancer drugs, to make improper diversion more difficult. This drug-company strategy may stem some of the most rampant abuses, but it adds to the cost and complexity of the pharmaceutical supply chain. It’s another way that 340B increases costs.

And who pays for this escalation in cost? You do.

Wasn’t Obamacare supposed to put an end to such scams? Humm?

Many eons ago in an Economics 101 class in college, I learned about the consequences of the so-called Invisible Hand in Rent Control in New York City. Thanks to a “liberal and caring” government, rent control legislation, enacted over various points in the 20th century did much to erode the rental market in NYC and had numerous unintended consequences, including but not limited to, an alarming rise in rates of homelessness and urban decay.

As Walter Block noted in a piece he noted in an article about rent control for the Library of Economics and Liberty, “As in the case of other price ceilings, rent control causes shortages, diminution in the quality of the product, and queues.”

After learning about the corruption inherent in such “well-intentioned” programs such as 340B, I have to wonder how the Affordable Care Act when it is fully implemented, is going to be any different?