Congress created the 340B Drug Pricing Program more than 30 years ago with the goal of helping safety-net providers stretch limited resources to expand care for vulnerable patients.
Hospitals and clinics that prioritized serving low-income, uninsured, and rural populations would receive discounted prescription drugs, which allowed them to reinvest those savings into patient care and helpful community services. But since its creation, the 340B program has grown to become something very different, and costly.
Although it started as a targeted assistance program, it has since evolved into one of the largest and least transparent healthcare programs throughout the United States. Annual 340B purchases have gone from roughly $6.9 billion in 2012 to over $81 billion in 2024.
Despite the extraordinary growth, policymakers, patients, and taxpayers still are unable to get reasonable answers to some very basic questions about the program:
- How much profit is being generated through the program?
- How is the profit specifically being used?
- Which patients are benefitting?
- Does the program still improve access to care in underserved communities?
- Is it lowering or increasing costs for patients?
Due to the lack of transparency, no one really knows these answers, and that’s why we desperately need to reform the program.
Over the years, eligibility for the program has expanded drastically and oversight has not kept up. Today, many large health systems participate alongside the rural hospitals and community clinics that the program was originally created to support. Vast networks of contract pharmacies used by hospitals within the 340B program have expanded nationwide and oftentime far beyond the communities even served by this program.
In most cases, hospitals can purchase medicines at steep discounts, receive reimbursement at much higher rates, and then pocket the difference. But a lack of accountability and reporting on how those dollars are being used is a major cause for concern; if we can’t track where savings go, then how are we going to determine if the program is fulfilling its original mission?
With roughly $81 billion in annual activity for the 340B program, we deserve to have clear accounting on how that money is being spent. Many of the covered entities within the program are not required to publicly disclose how much 340B revenue they generate, how it’s spent, or if it’s even directly benefiting the patients it’s supposed to serve.
The incentive structure of this program is a key culprit of the vast expansion and deserves some serious scrutiny. With the approved entities purchasing medicines at discounted prices but receiving reimbursements for those medicines based on much higher market prices, these entities typically use much more expensive drugs instead of generics to increase the amount of money they are reimbursed and get to keep. It’s one big reimbursement racket that’s damaging the entire healthcare system by causing:
- Higher Medicare expenditures
- Increased Medicaid costs
- Higher premiums for employer-sponsored insurance
- Increased costs for marketplace plans and taxpayer-funded subsidies
It’s time for our policymakers to prioritize some basic patient-focused reforms:
Tighten eligibility standards
A program whose budget expands by over $74 billion in 12 years deserves an in-depth examination. Participation in the 340B program should prioritize providers serving substantial numbers of low-income, uninsured, and rural patients – as the program was intended. Ensuring that benefits flow to entities that focus on these vulnerable populations, instead of large health systems with extensive resources, is crucial.
Establish clear charity care standards
Unlike community health centers, many hospitals receiving significant 340B revenue are not required to meet basic federal standards demonstrating how the savings help patients afford care. Congress needs to establish clear expectations linking 340B participation to measurable charity care and patient assistance efforts.
Require full transparency
Every covered entity within the 340B program should have to publicly report their total revenue generated by 340B, how those savings were spent, which patient assistance programs were funded by 340B savings, participating contract pharmacies being used, any affiliated child sites and off-site facilities, and clear metrics demonstrating patient benefits.
Rein in contract pharmacy expansion and off-site/child site eligibility
When used appropriately, contract pharmacies can improve access especially when a hospital does not have a pharmacy of its own. But there needs to be careful examination on whether national pharmacy networks disconnected from local patients are actually serving the program’s intended purpose. The goal should be to help patient access, not maximizing rebate opportunities.
The same goes for off-site facilities and child sites, which are essentially satellites of a covered 340B hospital or clinic. Congress should establish clearer standards for these satellite entities to ensure participating focuses on serving the vulnerable communities as intended, not expanding program reach to increase rebates.
Federal action is the only real solution to get this program back to its original mission. Since Congress created the program, they are responsible for reforming it. The goal of 340B was and should get back to being helping patients.
By tightening eligibility, improving reporting, and ensuring savings are directed towards those who need them most, Congress can tighten up the program to its original purpose while restoring public confidence in its future.