New 340B report from Minnesota exposes steep hospital markups on medicines, patient benefits remain unclear

Large hospitals and clinics in Minnesota reported marking up the prices of medicines by at least a total of $630 million in 2023, though the actual amount may be much higher. A new 340B transparency report from the Minnesota Department of Health reveals stark inequities in how Minnesota hospitals, health care providers, and ultimately patients benefit from the thirty-year-old 340B program. Designed to support eligible safety-net providers that serve large vulnerable populations, the report shows 340B in Minnesota instead disproportionately benefits large hospital systems and for-profit middlemen, like contract pharmacies and third-party administrators, raising serious concerns about whether vulnerable patients are ultimately benefiting.

Key findings from the report show that just a small fraction of participating Minnesota hospitals generate the most profits from the program. However, according to charity care data that hospitals report to the federal government, many of these same hospitals fail to provide charity care or community benefits proportional to their financial gains from these markups. The Minnesota report also sheds new light on how for-profit middlemen have made millions of dollars off of this important safety net program.

The report is a step in the right direction toward much-needed transparency by bringing to light important details of the 340B program. However, serious questions remain.

• What are these tax-exempt hospitals doing with the $630 million in 340B profit they made from their medicine markups? Charity care data provided to the federal government by many of the hospitals in the report show these profits are not helping low-income and uninsured patients afford the care they need.
• Why are large hospitals and for-profit entities reaping hundreds of millions of dollars in profit from 340B, while some safety net clinics operated their 340B programs at a loss? 13% of participants (primarily large hospitals) generated $500 million of the $630 million in reported 340B profits. The program was created to help vulnerable patients, not maximize profits for large hospitals, pharmacy chains and PBMs.
• Why are these for-profit entities making so much money off of this safety-net program? Partial reporting shows for-profit contract pharmacies and third-party administrators generated at least $120 million in fees from the program in 2023, representing approximately $16 out of every $100 in 340B profits.
• If this report “substantially underestimates” hospital profits from 340B markups, how much larger could the problem actually be? Most hospitals and clinics did not report data on provider-administered drugs, which includes many cancer medicines, and account for about 80% of 340B spending.

Laudably, the findings suggest a small fraction of clinics serving vulnerable patients do pass 340B discounts directly to them. Conversely, the report also shows that the program, as implemented, mostly benefits large institutions and for-profit middlemen with no evidence these entities use 340B-generated profits to support underserved patients. Minnesota hospitals, and indeed hospitals around the country, must answer these tough questions. Policymakers must demand greater transparency and accountability from hospitals to ensure 340B funds are used as intended. Mandating reporting on 340B profits, tailoring use of contract pharmacies to ensure access for vulnerable patients and rebalancing the program to support true safety-net providers and the vulnerable patients they serve are critical steps to reform 340B at the federal level.

Without clear accountability, the program risks perpetuating inequities and further undermining its original purpose.