This safety-net program is failing many vulnerable patients

A message from

Many poor Americans, as well as those who lack good insurance, often struggle with the high costs of health care services and prescription medications.

The 340B Drug Pricing Program was created in 1992 to help these vulnerable patients gain better access to medicines at hospitals and clinics treating a safety-net population.

  • But today the program no longer embodies its original mission and it’s unclear if vulnerable patients are benefiting today.

Why it’s important: 340B is now the second-largest federal prescription drug program, behind Medicare Part D.

  • The program has grown five times faster than the growth rate of the overall drug market.
  • But there hasn’t been commensurate growth in help for vulnerable patients.

What this means: The overly broad guidance, historically weak oversight and lack of transparency have contributed to the $38 billion program often failing patients most in need.

The background: 340B requires drug manufacturers to sell outpatient medications at a discount — ranging on average from 25% to 50% but can be as high as more than 90% — to covered entities. 

Covered entities include qualifying hospitals and safety-net clinics, which are known as grantees.

  • Community health centers and other grantees qualify based on the receipt of a federal grant from the Health and Human Services department to support care for vulnerable populations.  
  • Hospitals qualify in part based on how many low-income Medicare and Medicaid patients they admit and other safety-net characteristics.

340B participating grantees must meet federal reporting requirements under their grants while hospitals face no such requirements under the program. 

The challenge: Data from independent government reports indicate that many 340B hospitals may be charging even uninsured patients the list price for their medicines despite the discounted price the hospital paid.

Today, 340B generates billions in profits for primarily large hospitals, for-profit pharmacies and other middlemen like vendors and pharmacy benefit managers.

  • Some covered entities and for-profit pharmacies are siphoning resources away that could be helping many patients afford their medicines with little to no transparency into where the money is going.

What this means: Hospitals are able to prescribe a 340B medication to any of their patients — insured or uninsured — and in most cases can then retain the spread between the purchased and reimbursed price, with no reporting obligations and without the patient ever knowing.  

Evidence suggests that the difference between what the hospitals pay and what they charge patients and insurance companies is significant.

  • 340B hospitals are reimbursed on average three times what they pay for physician-administered medicines.
  • Some 340B medicines are so heavily discounted that covered entities can buy the medicine for one penny and then turn around and bill the patient and their insurer for the list price of the medicine.

40% of all hospitals in the U.S. participate in the program, but more than half of these covered entities provide a below-average level of charity care.

  • Key number: 63% of 340B hospitals provide less charity care than the national average of 2.7% for all hospitals.
  • An analysis in the New England Journal of Medicine found that “financial gains for [340B] hospitals have not been associated with clear evidence of expanded care or lower mortality among low-income patients.”
  • It’s also likely that non-eligible nongovernmental hospitals are participating in 340B, according to a Government Accountability Office (GAO) report.

The takeaway: Patients aren’t always benefiting from the 340B program despite the ever-increasing amount of discounts manufacturers provide through the program.