Washington, D.C. (November 7, 2023) — A new analysis from Health Capital Group examined the operating margins and charity care levels of 340B hospitals, finding financial wellness did not translate to 340B hospitals providing high levels of free or reduced cost care to vulnerable patients. This report echoes similar concerns raised by policymakers questioning the nonprofit status of 340B hospitals. It also raises more questions about what 340B hospitals are doing with all the profit they generate while participating in a safety-net program.

According to the analysis:

• 340B hospitals are making more. One fifth of 340B hospitals had operating margins of nearly 21% in 2021. For comparison, the average among non-340B hospitals was about 6%.
• 340B hospitals are charging patients more. On average, prices for commercial patients are higher at 340B hospitals than non-340B hospitals.
• 340B hospitals are providing very little charity care. The top performing 340B hospitals collected nearly $10 in total profit for every $1 they invested in charity care in 2021.
• 340B hospitals that are the most profitable provide the least amount of charity care. One fifth of 340B hospitals account for 85% of all 340B hospitals’ profits but just 24% of all 340B hospitals’ charity care.

“Most 340B hospitals are following the PBM playbook by taking advantage of our health care system at the expense of patients,” said Stephen J. Ubl, president and chief executive officer of PhRMA. “340B hospitals can buy medicines at a 60% discount because they are expected to support our most vulnerable patients. Instead, they charge those patients a marked-up price. The 340B program should help patients, not pad the bottom lines of hospitals.”

Hospitals participating in the 340B program are able to buy medicines at a deep discount, and then they charge patients higher prices — all while pocketing the difference. Because of this potential to generate significant profit, 340B hospitals are incentivized to prescribe more expensive medicines to patients. There is no requirement that 340B hospitals pass along discounts to patients or report how they use the profits from 340B to help patients access medicines.

As policymakers continue to deliberate on reining in health care costs and helping patients better afford their care, they should factor in the increasing role hospitals — especially those that participate in the 340B program — play in determining the cost of medicine.

Fixing the 340B program can meaningfully improve patients’ ability to access and afford their medicines if Congress takes a comprehensive approach. This includes ensuring the program reaches low-income or otherwise vulnerable patients, the intended beneficiaries of the program; strengthening eligibility requirements so only true safety-net providers participate in the program; and instituting stronger accountability measures throughout 340B to keep the program on track.

That’s why PhRMA is part of the Alliance to Save America’s 340B Program, which has committed to a broad set of principles that are designed to work together to get the 340B program back on track. Learn more here.

View the full analysis here.