Hospitals that participate in the 340B program contract with pharmacies to dispense the program’s drug prescriptions. Today there are over 33,000 distinct pharmacies participating in the program, known as contract pharmacies. While one might expect to find 340B contract pharmacies located in medically underserved neighborhoods to help vulnerable patients access medicines, that isn’t the case. Studies have found the exponential growth in contract pharmacies from 2011 to 2019 was concentrated in affluent and predominately white communities, and not in areas with high unmet need where expansion could help improve health equity.

Today, thanks to consolidation in the supply chain, PBMs now own the vast majority of pharmacies nationwide and make the largest share of their profits (55%) from their pharmacy business. They use the 340B program to drive that profit. There are more than 85,000 contracts between a 340B provider and a pharmacy with financial ties to one of the three largest PBMs — CVS Health, Express Scripts and OptumRx. More than 50 cents of each $1 in profits contract pharmacies receive through the 340B program go to just four PBM and pharmacy companies.

These for-profit entities and their affiliates have found their way into the 340B program to capture profits that could otherwise have been used to lower drug costs for low-income and vulnerable patients.

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.