The 340B hospital markup program cost state and federal taxpayers an estimated $6.5 billion per year due to lost Medicaid rebates according to a new report from Berkeley Research Group (BRG).
The 340B law prevents Medicaid from collecting rebates on prescriptions filled at the 340B price. This means that as more tax-exempt hospitals exploit the 340B program as a profit center, Medicaid rebate losses also rise. This is a hidden tax on patients, taxpayers, and employers.
Increased Medicaid Managed Care Costs in 2024
- The federal government: $4.2 billion in increased costs from lost rebates.
- State governments: $2.3 billion in combined increased costs from forgone rebates, with some states incurring as much as $265 million.
- The hardest hit: Pennsylvania ($265 million), Illinois ($238 million) and Massachusetts ($190 million)
- Zoom in: This loss of savings results in increased costs to cover medicines for Medicaid beneficiaries, which leads to a higher burden on state budgets and taxpayers.
Rising 340B abuse increases state costs, burdens taxpayers
- The 340B program began with a small number of hospitals focused on safety net care but now brings nearly $65 billion in oversight-free revenue to tax-exempt hospitals, clinics and their for-profit partners and patients aren’t benefitting.
- It is now the second largest federal drug program, and on track to be the largest by 2027, surpassing all of Medicare and Medicaid.
- As 340B hospitals and clinics increasingly exploit the program and essentially take money from Medicaid, the costs to the government and taxpayers will continue to increase.
While federal and state governments are facing higher costs due to forgone Medicaid rebates as a result of the 340B program, tax-exempt hospitals and clinics are buying medicines for as little as a penny, marking up the price by thousands of dollars, and pocketing the profit.
The bottom line: Growing abuse of the 340B hospital markup program is increasing Medicaid costs and placing a heavier financial burden on taxpayers.
Learn more at PhRMA.org/340B.
Molly Jenkins
Molly Jenkins is a senior director of Public Affairs at PhRMA, where she leads communications on the 340B hospital markup program. Before joining PhRMA, she led issue advocacy and reputation campaigns at Purple Strategies. She also worked on Capitol Hill in serval different capacities, including leading communications for Rep. Greg Walden and as press secretary for the Energy and Commerce Committee. Molly has an M.A. in Health Communication and Media Relations from Johns Hopkins University and a B.A. in journalism from Texas Christian University.
Molly Jenkins