340B spending is exploding, forcing prices up for patients, employers and government programs

Year after year, the 340B program continues to balloon at a rate unseen in any other part of health care. 340B hospitals and grantees purchased more than $66 billion of medicines at discounted 340B prices according to new figures from HRSA – a nearly 24% increase compared to 2022 purchases. For comparison, total net spending by insurers and patients on all medicines increased only 5.6%, on average, over the past five years. And net prices for medicines are generally flat or falling. 

There is scant evidence that these reduced prices are reaching all of us who utilize hospital services, much less the vulnerable patients this program was designed to help. Instead, evidence suggests many 340B hospitals pocket the revenue they generated from the program and use it to expand their reach into wealthier areas, fund building upgrades, pay executive bonuses, and even cover the salary of football coaches. This constitutes a “hidden tax” that is borne by all of us – taxpayers, employers, and most importantly, the vulnerable patients that the program is supposed to help. Here’s what this looks like:

• Higher costs for employers. An IQVIA analysis found that 340B increases self-insured employers’ drug costs by more than 4%, resulting in about $5 billion in lost revenue per year. The analysis was conducted before this latest government data release, and it’s likely that the cost to employers is growing as fast as the 340B program.
• Higher costs for states and taxpayers. There is also evidence that 340B is harming Medicaid budgets, too. One analysis found that as 340B providers proliferated, Medicaid spending rose. The more 340B sites that opened, the more Medicaid spending increased, straining state budgets.
• Higher costs for everyone. Because 340B hospitals are at a competitive advantage relative to non-340B hospitals, the program incentivizes hospitals and health systems to gobble up independent physician practices and convert them into outpatient departments of 340B hospitals, fundamentally distorting local health care markets. This drives increased prices as competition diminishes and care shifts from physician offices to higher cost hospital settings, helping to explain the impact on Medicaid and other health care spending. 

Considering all these facts, it begs the question – if the savings aren’t making their way to patients, where is all this money going? Here’s how it works:

• 340B hospitals and grantees purchase medicines at prices that are, on average, 57% below the list price, but can be as low as a penny. They often turn around and charge patients, employers, and taxpayers full price. Reports show they even assign medical debt to patients based on the marked-up price.
• According to IQVIA, 340B sales to hospitals and grantees increased more than three times faster than non-340B sales between 2018 and 2023 when measured at the estimated list price (129.4% vs. 41.4%, respectively).  

Given the negative repercussions across the system, policymakers are starting to take notice and have proposed comprehensive reforms to the 340B program. It’s time for 340B to get back on track and working for those it was originally intended to serve - vulnerable patients and communities.