Analysis Finds Higher Outpatient Drug Spending At 340B Hospitals

Washington, DC (March 14, 2018) – A new analysis finds hospitals participating in the 340B Drug Discount Program have higher per patient outpatient pharmacy costs than their non-340B counterparts – meaning patients at 340B hospitals are prescribed more medicines and/or more expensive medicines.

“There is a growing body of research showing that the 340B program is driving up costs for patients and the health care system,” said Stephen J. Ubl, president and CEO of the Pharmaceutical Research and Manufacturers of America (PhRMA). “The biopharmaceutical industry has long supported the 340B program, but perverse incentives have steered it away from its original intent. It’s time to get 340B back on track for patients.”

These prescribing patterns help highlight important effects, such as increased patient cost sharing, which undermines 340B’s goal of helping safety-net providers access discounts on outpatient medicines for uninsured or otherwise vulnerable patients. These outpatient medicines include medicines administered or dispensed at a hospital’s offsite facility, like infusion medicines, or medicines prescribed at a hospital and picked up at a contract pharmacy. There is currently no requirement that hospitals pass 340B program savings along to patients and there is growing evidence suggesting that these discounts may actually contribute to higher out-of-pocket costs for patients.

The analysis, which was prepared by Milliman and commissioned by PhRMA, compares outpatient drug spending for commercially insured patients among 340B disproportionate share (DSH) hospitals, non-340B DSH hospitals and other non-340B hospitals, as well as a subset of these hospitals that areteaching hospitals. The authors analyzed data from Milliman’s 2015 Consolidated Health Cost Guidelines database and found 340B hospitals have higher per patient outpatient pharmacy costs than non-340B hospitals despite controlling for patient health status.

Specifically, the analysis found:

  • Average annual per patient outpatient drug spending at 340B DSH hospitals was nearly three times spending at non-340B DSH hospitals ($457 and $159, respectively).
  • Average annual per patient outpatient drug spending at major teaching hospitals that are 340B DSH hospitals was more than two and a half times that at major teaching hospitals that are non-340B DSH hospitals ($539 and $213, respectively).

The analysis indicates that 340B hospitals tend to have higher per patient outpatient pharmacy spend when compared to non-340B hospitals. Because deductibles and coinsurance typically expose patients to higher cost sharing when the total cost of prescriptions they are prescribed increases, the prescribing patterns identified in the analysis may result in higher cost sharing (depending on a patient’s plan design) and higher premiums if the hospital does not pass the 340B discounts through to the patient or the payer.

This analysis closely mirrors the 2015 Government Accountability Office (GAO) report that analyzed treatment costs for Medicare Part B beneficiaries at 340B DSH hospitals. The GAO report concludes that the 340B program incentivizes participating hospitals to prescribe more medicines and/or more expensive medicines to increase their profits by taking advantage of the spread between the 340B discounted acquisition cost and the reimbursement they receive from patients and payers.

Over the last 25 years, the 340B program has expanded both in number of participating hospitals and volume of 340B spending, evolving into a program that feeds hospitals’ bottom lines without evidence that vulnerable, low-income patients are seeing improved care at these hospitals. Specifically, the New England Journal of Medicine “found no evidence of hospitals using the surplus monetary resources generated from administering discounted drugs to invest in safety-net providers, provide more inpatient care to low-income patients, or enhance care for low-income groups in ways that would reduce mortality.”

In recent months, policymakers both in Congress and the Administration have increased their scrutiny of the program. Voices on both sides of the aisle have called for fixes to 340B to ensure its sustainability for the future, including increased reporting requirements for 340B DSH hospitals and a pause in 340B enrollment of new DSH hospitals.

To learn more about the 340B program and ways it could be fixed, visit

To read the full report, “Commercial Payers Spend More on Hospital Outpatient Drugs at 340B Participating Hospitals,” visit

About PhRMA
The Pharmaceutical Research and Manufacturers of America (PhRMA) represents the country’s leading innovative biopharmaceutical research companies, which are devoted to discovering and developing medicines that enable patients to live longer, healthier, and more productive lives. Since 2000, PhRMA member companies have invested more than $900 billion in the search for new treatments and cures, including an estimated $79.6 billion in 2018 alone.

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