About 340B and Why It Needs to Be Fixed

Congress created the 340B Drug Pricing Program to help vulnerable patients access medicines at safety net facilities. Under the program, manufacturers are required to provide steep, mandatory discounts on outpatient medicines to certain safety net clinics and qualifying hospitals.  Nearly three decades after the program was created, the program no longer resembles its original mission, with little to no evidence patients are always benefiting. Today, large hospital systems, for-profit pharmacies and other middlemen have co-opted a program meant to help patients and turned it into one that boosts their bottom lines.


Putting the 340B Program Back on Solid Footing by Stopping Program Abuses and Ensuring It Benefits Patients

The 340B program, which is solely funded by the biopharmaceutical industry, is now the second largest federal prescription drug program, behind only Medicare Part D. The current 340B program attracts entities and for-profit pharmacies because lax program rules enable them to manipulate the program to benefit their bottom lines, often to the detriment of patients. Alarmingly, an analysis in the New England Journal of Medicine concluded that, “financial gains for [340B] hospitals have not been associated with clear evidence of expanded care or lower mortality among low-income patients.”


Biopharmaceutical companies are advocating for meaningful improvements that can be made to ensure patients benefit more directly from the discounts provided by manufacturers and that covered entities are held accountable for how they use 340B discounts. These improvements include:


  • Patient Affordability: While the 340B program was created to help vulnerable patients, it is unclear if patients are in fact benefiting today. Data indicate that many 340B hospitals may be increasing out-of-pocket costs for patients, leaving patients to pay the full price for their medicines despite the discounted price the hospitals receive. Similarly, needy, uninsured patients who show up at 340B hospitals’ contract pharmacies don’t always benefit from the discounted price. Changes should be made to ensure patients more directly benefit from the discounts provided by manufacturers.
  • Patient Definition: Covered entities are only permitted to use 340B discounts for individuals who meet the definition of patient under the 340B program. But the Government Accountability Office (GAO) and Office of Inspector General have stated that the Health Resources and Services Administration’s (HRSA) guidance does not clearly define the term “patient” for the purposes of the 340B program. A clear definition is needed to ensure needy patients are truly benefiting from 340B, not hospitals and for-profit pharmacies.
  • Transparency in the Program: The 340B program generates billions in profits for hospitals, pharmacy chains and other entities, siphoning resources away from patients with little to no transparency into where the money is going. There are no requirements for how 340B hospitals must use 340B discounts to help patients, and they consistently oppose any proposals that would require them to show how much in discounts they receive from 340B and how the money is used. Policymakers should implement common-sense transparency requirements so that 340B patients are reaping the benefits of the program.
  • Program Integrity: Increased government oversight is needed to ensure the 340B program is sustainable and directly benefits vulnerable or uninsured patients, while at the same time certifying program requirements mandated in the statute are being met. As recently as December 2020, GAO found that for HRSA audits in FY 2012-2019, there were more than 1,500 findings of noncompliance by covered entities with 340B requirements. A separate GAO report found it is likely that there are nongovernmental hospitals participating in 340B that are not even eligible for the program but have taken advantage of the lax oversight so they can reap the financial benefits of it. There is much more that HRSA could be doing today to better oversee this program and prevent abuse.
  • Contract Pharmacies: Since 2010, there has been a 4000% increase of contract pharmacies in the 340B program, with for-profit chain pharmacies like CVS, Walgreens and Walmart flooding the program. These pharmacies help enable large hospitals to increase their 340B generated revenue through “contract pharmacy arrangements” – without any congressional approval and despite there being no mention of “contract pharmacies” in the original 340B statute. A 2014 Office of Inspector General report found uninsured patients of hospitals often pay full price filling prescriptions at contract pharmacies, even though the hospital received medicines at steeply discounted 340B prices. The contract pharmacy policy should be reconsidered as part of broader efforts to ensure patients have access to affordable medicines at 340B providers.