340B: The Unintentional Hospital and Pharmacy Profit Stream That Was Supposed to Help Patients

What is 340B?

Everyone can agree that vulnerable patients should be able to access medications they might not be able to afford. The 340B Drug Pricing Program was designed to help with just that. Since 1992 manufacturers have provided billions of dollars in steep discounts on outpatient medicines to safety-net clinics and qualifying hospitals expecting that those entities would use the savings to ensure vulnerable patients have access to needed medicines. But the 340B program has strayed far from its safety net purpose. Instead, it has become less about patients and more about boosting the bottom lines of hospitals and for-profit pharmacies. How? Large hospitals buy deeply discounted 340B medicines and then turn around and charge both uninsured patients and insurance companies higher prices, pocketing the difference with little to no evidence they use that money to help patients. The New York Times provided a case study about exactly this – a hospital system in Virginia is abusing the 340B program to increase its profits and harming vulnerable patients in the process. Sadly, this is just one example of the countless hospitals taking advantage of a program originally created to be a safety-net for disadvantaged patients.

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Where is 340B?

340B hospitals and their many contract pharmacies are found in every state. How much charitable care are 340B hospitals in your state providing as compared to the national average? Are 340B hospitals in your state contracting with local pharmacies, or are they profiting from contracts with pharmacies nationwide? Explore the interactive map below and select a state to access state-specific data on 340B.

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How Do We Fix 340B?

The 340B program suffers from lax rules and oversight that enable large, wealthy hospitals and chain pharmacies to gain financially, often at the expense of patients. An analysis published in the New England Journal of Medicine found no evidence hospitals invest their 340B profits into safety-net care. Similarly, a study published in the Journal of the American Medical Association concluded: “Nonetheless, our work adds to a growing body of evidence questioning the degree to which 340B program growth serves vulnerable communities.” Here are some ways Congress can fix 340B.

Ensure Benefits Reach Low-Income Patients

  • All hospitals in the program and their contract pharmacies should be required to pass through 340B discounts to reduce the cost of medicines for low-income and vulnerable patients. Further, Congress needs to clarify in the law who is an eligible “patient” to help ensure the benefits of 340B are reaching those patients. There are currently zero patient protections and zero requirements for how hospitals use 340B discounts to help patients afford their medicines, enabling large hospital systems, chain pharmacies and pharmacy benefit managers (PBMs) to generate massive profits without commensurate growth in access and affordability for patients most in need.

Confirm True Safety-net Participation

  • Many hospital participants are not located in medically underserved communities, provide very little charity care and, alarmingly, engage in aggressive debt collection practices aimed at patients who are least able to afford care. This program isn’t working for patients. Congress needs to ensure that only true safety-net entities are participating in 340B and require 340B hospitals to provide meaningful levels of charity care to uninsured, low-income and other vulnerable patients.

Strengthen Accountability Measures

  • Congress must implement stronger, common-sense accountability measures for the program. This includes requiring hospitals to publicly report basic information like how much charity care is provided at each 340B hospital and its associated offsite facilities. Creating a neutral, third-party clearinghouse for claims-level data will help ensure 340B discounts are being properly claimed by hospitals and clinics, and that all participants are complying with key program safeguards. Congress should also clarify that 340B is a federal program governed by the federal government exclusively.

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