Study after study after study: Contract pharmacy expansion not aligned in communities 340B is meant to serve

Evidence continues to show that 340B hospitals and their contract pharmacies are often not helping patients access their medicines, especially patients in socioeconomically disadvantaged areas. Contract pharmacies dispense 340B medicines on behalf of “covered entities,” which include certain health clinics and hospitals. In 2010, HRSA dismissed concerns raised by stakeholders about the increased program integrity risks associated with contract pharmacies, and greatly expanded its contract pharmacy guidance to allow covered entities to have an unlimited number of contract pharmacy arrangements. What has happened in the past decade is an explosion of business relationships that enable large hospitals and large for-profit pharmacy chains to increase their 340B-generated revenue, with hardly any oversight and with little to no patient benefit.

The location of these pharmacies is important when considering the 340B program’s original intention: to help vulnerable patients access medicines at certain safety-net hospitals and clinics. A recent study suggests otherwise. Last week the Journal of the American Medical Association (JAMA) published a study that found contract pharmacy growth from 2011 to 2019 was concentrated in affluent and predominately white communities. This makes you wonder how this program is benefiting vulnerable patients, especially when you consider the study also found that “the share of 340B pharmacies in socioeconomically disadvantaged and primarily non-Hispanic Black and Hispanic/Latino neighborhoods declined” over the same time period. This builds on a mountain of evidence that covered entities — big hospitals and pharmacy chains — have taken advantage of every opportunity under the 340B program to increase profits, not serving the patients who need help most.

According to JAMA, by 2019, nearly one-third of all pharmacies in the United States were contracting with a 340B hospital. And while the original intention of the 340B program was to help low-income and vulnerable populations, between 2011 and 2019, the share of 340B contract pharmacies located in the lowest income neighborhoods declined by 5.6%. In contrast, the share of 340B pharmacies in the highest income neighborhoods increased by 5%.

Another recent study from Avalere had similar findings, noting that 94% of contract pharmacies are in a different zip code than their 340B parent DSH hospital, with most in more affluent and less diverse areas. In fact, of the contract pharmacies in different zip codes than their parent hospital, 60% were in areas with higher median income and more than 40% were located in less diverse areas compared to their parent hospital. These findings align with results published earlier this year in the American Journal of Managed Care, which concluded the “growth of [pharmacy] contracts with 340B hospitals was less likely in areas with higher uninsured rates and in medically underserved areas.”

On top of that, an Xcenda analysis found just one quarter of contract pharmacies were located in medically underserved areas, meaning areas that have too few primary care providers, high infant mortality rates, high poverty rates or a large elderly population. However, there is significant variation between states. For example, California 340B DSH hospitals have over 15,000 contract pharmacy relationships, yet just 11% of 340B contract pharmacies are in medically underserved areas.

Taken together, these studies clearly show that the expansion of contract pharmacies tends to be in less diverse, higher income neighborhoods and not in areas with high unmet need where expansion could help improve health equity. Large 340B hospitals and their contract pharmacies appear to be taking advantage of the 340B program to generate additional revenue without ensuring that low-income and underserved patients are benefiting. This is just one of many ways the 340B program has strayed off course. That’s why the biopharmaceutical industry is pushing for patient-centered changes to the 340B program that ensure the billions of dollars manufacturers provide in 340B discounts every year are more directly helping patients.

Learn more at PhRMA.org/340B.