Preferring medicines with higher prices. Blocking access to low-cost generic and biosimilar treatments. Refusing to share savings with patients at the pharmacy counter. Denying people the benefit of patient assistance programs. These are some of the ways pharmacy benefit managers, or PBMs, game the health care system to maximize profits at patients’ expense. But there is one more PBM scheme that deserves greater scrutiny: exploiting the federal 340B program.
Hospitals that participate in the 340B program contract with pharmacies to dispense the program’s drug prescriptions. Now consider that over 33,000 distinct pharmacies participate in the program, known as contract pharmacies. Thanks to consolidation in the supply chain, PBMs now own the vast majority of pharmacies nationwide and make the largest share of their profits (55%) from their pharmacy business. They use the 340B program to drive that profit.
The data:
- Pharmacies with financial ties to PBMs dominate the 340B program. There are more than 85,000 contracts between a 340B provider and a pharmacy with financial ties to one of the three largest PBMs — CVS Health, Express Scripts and OptumRx.
- PBM profits are propped up by the 340B program. More than 50 cents of each $1 in profits contract pharmacies receive through the 340B program go to just four PBM and pharmacy companies — Walgreens, Walmart, CVS Health and Express Scripts. The average profit margin earned by covered entities and the pharmacies they contract with on commonly dispensed 340B medicines is an estimated 72% vs. a margin of 22% for non‐340B medicines dispensed through independent pharmacies.
- PBMs aren’t the only large corporations generating revenue from 340B. Nearly half of the Fortune 25 companies generate revenue from the 340B program, including PBMs, contract pharmacies, third-party administrators, health plans and wholesalers.
Alarmingly, there are federal and state legislative proposals that would allow unfettered use of contract pharmacies — meaning PBMs would continue to siphon money from 340B without guardrails or oversight. This is especially concerning given hospitals’ use of contract pharmacies is not improving access to medicines for patients. These proposals put the financial interests of for-profit corporations ahead of the needs of vulnerable patients.
Instead, Congress should put an end to the exploitation of this important safety-net program and put it back on track for the patients it was meant to assist. Learn more at PhRMA.org/340B.
Nicole Longo
Nicole Longo is Deputy Vice President of public affairs at PhRMA focusing on Medicare, 340B, importation and more. She previously worked for a D.C.-based public affairs firm where she assisted a wide range of clients with communications efforts on everything from trade policy to agriculture policy to health care policy. Outside the office, Nicole can be found trying new restaurants (usually Italian), taking an occasional barre class and cheering on the Cincinnati Bengals.
Nicole Longo
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PBMs using 340B program to drive profits at patients’ expense
340B
PBMs/Insurance
PBMs using 340B program to drive profits at patients’ expense
PBMs using 340B program to drive profits at patients’ expense