340B Program - National Consumers League

340B Program: A Patient Safety Net in Desperate Need of Federal Reform

Congress must pass federal reforms to the 340B Drug Pricing Program to ensure medication discounts benefit patients in need, not hospitals and health industry middlemen.

The Issue

The 340B Drug Pricing Program was created to help low-income and uninsured patients access their life-saving medications and care. The 340B program allows hospitals and other covered healthcare entities to access medications at discounted prices from manufacturers with the intent that they pass savings onto patients. Unfortunately, the reality of the program is different today.

Over time, some 340B hospitals, the pharmacies they contract with, and pharmacy benefit managers (PBMs) have warped the program into a massive profit-generating scheme by failing to pass drug discount savings onto patients. In some instances, 340B hospitals charge patients the full price for medicines they rely on and pocket the difference, all while providing negligible levels of charity care and pursuing aggressive, unethical debt collection tactics against the patients they are meant to serve.

The Problem

The 340B program has grown exponentially in size and the number of hospitals and other healthcare entities participating in the program has exploded. Despite this growth, less than half of 340B hospitals are located in the medically underserved areas the program was created to support, while almost three-quarters of disproportionate share hospitals (DSHs) – hospitals treating a disproportionate amount of uninsured or low-income patients – provide below average levels of lower-cost or free care known as charity care. Though hospital charity care levels are often below-average, their profits continue to soar – DSHs were estimated to have earned over $44 billion in 340B profit in 2022, three times more than they spent on charity care that year.

340B abuses harm patients who rely on savings from discounted 340B medicines. Instead, some patients are charged full price and relentlessly pursued for medical debt if they aren’t able to afford their care. Meanwhile, hospitals rake in massive amounts of profit – all at the expense of uninsured or low-income patients.

The Solution

Federal lawmakers must take action and advance policy reforms to bring more transparency, accountability, and oversight to the 340B Drug Pricing Program to ensure the program serves uninsured or low-income patients, not profits.

340B by the Numbers

$66 Billion in Purchases

The 340B program is now the second largest federal prescription drug program after Medicare Part D, and discounted purchases under 340B totaled a massive $66.3 billion in 2023.

Massive Price Markups

Medicine price markups are 6.6 times higher at 340B hospitals than independent clinics, and research shows participation in 340B does not improve health outcomes for uninsured and low-income patients.

Lack of Transparency

In 2022, hospitals made 87% of purchases under 340B, but are not required to disclose their 340B profits or even how their revenue is used to lower patient costs.

Rural Regions Left Behind

340B Rural Referral Center (RRC) hospitals do not have to be in rural areas or even treat rural patients to qualify for 340B. 82% of currently enrolled RRCs are in urban areas.

What They Are Saying About 340B

“The bottom line is that this program needs stronger guardrails to ensure that everyday Americans – especially those in underserved communities – have access to affordable medications.”

– Sally Greenberg, Chief Executive Officer, National Consumers League

“The 340B program is, in general, a wasteful program that does not serve the low-income populations it was intended to serve. It’s now an issue that could be addressed by the incoming Administration and should be on the list of programs that the newly introduced Department of Government Efficiency examines.”

– William S. Smith, PhD, Senior Fellow and Director, Pioneer Institute; Robert Popovian, Pharm.D., MS, Senior Visiting Health Policy Fellow, Pioneer Institute

“The program has grown rapidly among hospitals that serve wealthier patient populations. 340B hospitals are expanding into more affluent neighborhoods, and they are mindful of payer mix as they move into areas with fewer publicly insured patients. 340B institutions are more likely to avoid counties with lower income levels and more uninsured patients.”

– Dr. Anthony M. DiGiorgio, Neurosurgeon, University of California San Francisco.

“In the litany of examples of how the U.S. health care system has become so broken, none is as instructive as the 340B Drug Discount Program. Once an obscure program that ensured that a few dozen safety-net hospitals and clinics could help low-income patients without suffering financially, it has become twisted into a “cash cow” for major healthcare systems that, ironically, incentivizes participants to put patients with commercial insurance first…and uninsured and Medicaid patients last.”

– Dr. Madelaine Feldman, President, Coalition of State Rheumatology Organizations

“A promising bright spot of the program’s growth centers around the unique opportunity to reduce health inequities by serving patients in rural or low-income areas, as most disproportionate share hospitals do. Yet, a recent report found that only 38% of 340B hospitals and less than one-third of affiliated sites and contract pharmacies are located in medically underserved areas.”

– Dr. Diane Nugent, President and Founder, Center for Inherited Blood Disorders