The 340B Drug Pricing Program was created to help certain hospitals and clinics that serve rural, vulnerable, and underserved populations purchase outpatient drugs at discounted prices. The aim of the program is to help these healthcare facilities stretch their resources and expand their services to underserved communities. However, as the program has ballooned to more than 55,000 qualifying entities, hospitals are making record profits from the program as their spending on charity care has declined. More troubling, patients are paying more for the very drugs the 340B program was designed to cover.
Everyone supports less expensive [or lower priced] drugs for underserved communities. But the way to accomplish this isn’t to expand government’s role, but to provide greater oversight and demand accountability from the hospitals and clinics who benefit.
How is the 340B program supposed to work?
The 340B program requires drug manufacturers participating in Medicaid to provide outpatient drugs to eligible healthcare organizations at significantly reduced prices. These organizations, including certain hospitals and clinics serving low-income and uninsured patients, can then purchase these drugs at the discounted rate, allowing them to stretch their resources further and provide more comprehensive care to their communities.
How are hospitals profiting from 340B?
Hospitals profit by purchasing drugs at discounted prices from pharmaceutical manufacturers and billing insurance providers for the full amount. For example, a hospital may buy a drug that costs $1,000 for $500 through the 340B program. They then charge a patient’s insurance the full price of $1,000 and pocket the $500 difference. From 2015 to 2019, covered entities under the 340B program saw their profits soar, reaching more than $40 billion in 2019.
What are hospitals doing with these profits?
In many cases, that isn’t entirely clear.
What is clear is that patients are not seeing the benefits of the 340B program as designed. In the commercial market, average per patient spending on outpatient medicines was more than 2.5 times higher at 340B hospitals than non-340B hospitals.
Adding insult to injury, more than 40% of all U.S. hospitals participate in the 340B Program, but more than half (63%) of the participating hospitals have charity care rates below the national average.
What measures are in place to ensure hospitals use the 340B program responsibly?
The Health Resources and Services Administration (HRSA) oversees the 340B program and has implemented various guidelines and audits to monitor compliance and prevent abuse. However, these measures are insufficient, and more transparency and accountability are needed to ensure hospitals are using the program as intended—to benefit patients in need.
Though support to make prescription drugs more affordable for vulnerable and underserved populations is nearly universal, state legislators should resist the siren calls of hospitals, especially those serving the most affluent areas of the country, and focus on accountability and transparency.
Hospitals covered by the 340B program are making huge profits, but patients are not seeing lower prices. It’s fair to ask these hospitals – where is the money going?
Sources:
Avalere: Key Stakeholders of the 340B Drug Discount Program
https://avalere.com/insights/key-stakeholders-of-the-340b-drug-discount-program#:~:text=Covered%20Entities,-Facilities%20that%20qualify&text=Eligible%20organizations%20include%20qualifying%20hospitals,were%20other%20non%2Dhospital%20grantees.
Dr. Neal Masia, Ph.D: 340B Drug Pricing Program: Analysis Reveals $40 Billion in Profits in 2019
https://340breform.org/wp-content/uploads/2021/05/AIR340B-Neal-Masia-Report.pdf
Hunter, et. al: Analysis of 2020 Commercial Outpatient Drug Spend at 340B Participating Hospitals
https://www.milliman.com/-/media/milliman/pdfs/2022-articles/9-13-22_phrma-340b-commercial-analysis.ashx
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