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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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.”

Biopharmaceutical companies, which are the sole funders of the federal program, are calling for meaningful improvements to make sure patients – not pharmacies and hospitals – benefit from the 340B program.

  • Put patients first
    Put Patients First

    Many patients never see the benefits of 340B because hospitals and pharmacies keep the profits for themselves. There is even evidence that 340B is driving up costs for patients. Patients must come first - and must more directly benefit from the discounts provided by manufacturers.

  • Clearly define who benefits
    Clearly Define Who Benefits

    There has been evidence over the years of covered entities abusing the lax definition of a 340B patient to increase their profits by seeking discounts on medicines that were not provided to true 340B patients. By more clearly defining who is a 340B patient and ensuring vulnerable patients benefit, the program can more effectively help people in need and make it harder for participating hospitals and pharmacies to use it for their own financial gain.

  • More transparency
    More Transparency

    There are no requirements for how participating hospitals and pharmacies must use their 340B discounts to help patients and no way to know whether patients benefit from 340B. The program needs common-sense transparency reporting requirements that hold hospitals and pharmacies accountable and ensure patients are seeing the benefits.

  • Oversight and integrity
    Oversight and Integrity

    Lack of oversight in the 340B program has allowed for thousands of instances of noncompliance by hospitals and pharmacies and opened the door for ineligible entities to take advantage of the program’s financial benefits. The 340B program needs more oversight and tighter rules to prevent abuse.

  • Revisit role of contract pharmacies
    Revisit Role of Contract Pharmacies
    For-profit chains like CVS and Walgreens have flooded the 340B program, enabling large hospitals to increase their revenue despite no mention of contract pharmacies in the 340B statute. Uninsured patients often pay full price for medications at contract pharmacies, even though hospitals receive those medicines at a steep discount. And these pharmacies are often not located in vulnerable communities 340B is meant to serve.