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A program distorted: Congress created the federal 340B program in 1992 to help vulnerable and uninsured patients access medicines. What once served fewer than 100 safety-net hospitals is now the second-largest federal prescription drug program—topping $81 billion and serving as a cash cow for large hospital systems, for-profit pharmacies, pharmacy benefit managers (PBMs) and other middlemen.
There is no requirement that hospitals use 340B program profits to help patients afford the medicines they need. Big, tax-exempt hospitals abuse this loophole to buy medicines for as little as a penny and mark them up by 1,000% or more—passing the cost on to patients, employers and taxpayers.
The incomplete picture in Illinois: Illinois tax-exempt hospitals and clinics are exploiting the federal 340B program for profit, but they aren't required to disclose what they earn from 340B markups, where that money goes or how it affects patients, employers and taxpayers.
However, reporting in Crain's Chicago Business describes findings highlighted in a recent Illinois Central Management Services (CMS) memo on the program:
- Illinois hospitals generate more than 2.5x as much in estimated 340B-related profit as they spend on charity care.
- Large 340B hospitals charge roughly 7% more on average than comparable non-340B hospitals, with outpatient prices nearly 20% higher.
- The current program is estimated to cost Illinois employers about $224 million a year.
What Minnesota reveals next door: Minnesota's annual 340B transparency report shows an even clearer picture. Large hospitals, clinics and their for-profit partners generated at least $1.48 billion in net revenue from 340B markups in a single year.
Three things from Minnesota’s report stand out:
- Big hospitals profit more than true safety-net providers. Just four large hospitals in Minnesota captured half of the $1.34 billion that went to 340B covered entities.
- Prescriptions for low-income patients are a key source of 340B profits. $261 million came from markups on prescriptions filled for Medicaid patients in Minnesota—costs borne by taxpayers.
- Middlemen are in on it. Contract pharmacies—often owned by the three largest PBMs—received $120 million from the program in Minnesota alone.
The bottom line: 340B is a hidden tax on Illinois employers, taxpayers and patients—with no way to confirm the program is doing what it was meant to do.
Learn more at PhRMA.org/340B.
Will May
Will May is senior director of state public affairs at PhRMA, where he leads proactive media engagement and campaign efforts across a broad portfolio of states. Prior to joining PhRMA, Will worked at two Washington, D.C.-based public affairs firms, advising companies on advocacy communications and campaigns at the federal, state and local levels. A Washington, D.C., area native, Will holds a B.A. from Wake Forest University. He lives in the Adams Morgan neighborhood with his wife, Grace, and enjoys cooking, golfing and spending time with their dog, Winston.
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340B
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