Hospital pharmacist selecting medications

340B Drug Pricing Program

What do decision-makers need to know about the program Congress created to allow certain entities to purchase outpatient drugs at federally mandated discounted rates? 

The 340B Drug Pricing Program has experienced explosive growth, now representing the second-largest federal prescription drug program after Medicare Part D.

What is the 340B Program?

  • Congress created the 340B Drug Pricing Program in 1992 to allow covered entities to purchase outpatient drugs from manufacturers at federally mandated discounted rates. This includes frontline care centers, among others, that provide care to historically underserved populations.
  • The original law is vague on the intent of 340B, but congressional testimony has asserted a much-cited goal to “stretch scarce federal resources as far as possible to better serve uninsured and underinsured patients.”1
  • Manufacturers are required to provide steep discounts on medicines to these qualifying clinics and hospitals. Participating covered entities typically save 20% to 50% on outpatient drug costs through the 340B program.2 
  • The use of 340B pricing grew in 2010 when Congress implemented an expansion of covered entity eligibility, allowing more providers to enter the program3, and regulators opened the door for those providers to work with an unlimited number of 340B contract pharmacies to distribute drugs.4 
  • In 2018 alone, the 340B Program processed about $94 billion in discounted drug sales.5 

What should decision-makers understand about 340B?

  • Three decades after 340B was created, the program has ballooned to encompass nearly 7% of the total U.S. drug market.6 
  • Since the program was expanded in 2010, 340B has seen a 4,000% increase in the use of outside 340B contract pharmacies to deliver medications.7   

Does the 340B program lower healthcare costs for patients?

  • We don’t know.
  • Despite the intended purpose of 340B pricing, there is mixed evidence on how covered entities are using 340B revenues to benefit patients and whether the program lowers healthcare costs for individuals. 
  • Researchers have found that 340B-participating entities often do not pass manufacturer discounts directly to patients. 340B hospitals charge cash-paying or uninsured patients a median of 3.8 times more than they pay to purchase 340B drugs – the same margins they make on 340B drugs from commercial insurers.8 
  • Program rules may allow safety net providers to use discounted 340B pricing on medicines to cover other underfunded or uncompensated patient care, making it difficult for decision-makers and policy-makers to identify health system challenges that need to be addressed. 
  • Despite this potential to divert medication savings from the 340B program to other areas of care, large hospital systems, certain pharmacies, and other middlemen have not been shown to provide more charity care compared to facilities that do not participate in 340B.9 

Does the 340B program lower costs for the health care system overall? 

  • We don’t know. 
  • Stakeholders have challenged the 340B program due to its lack of specificity in requirements, lack of transparency in impact, limited oversight, and vulnerability to duplicate discounts and medication diversion.
  • In part, because the program does not prescribe how 340B revenue is used to serve patients, stakeholders have observed that the use of 340B revenue is a “black box”: the impact on hospital cost savings and services to patients is hard to measure.10 
  • Several government reports have concluded that government oversight of the 340B program was insufficient to ensure program compliance by either covered entities or manufacturers. 11, 12, 13, 14
  • Thorough review and revision of program requirements, implementation, and administration may help ensure 340B benefits are flowing to underserved patients as intended. Proper oversight can help discounted 340B pricing continue as a vital part of the U.S. health care safety net.
340B

Commentary: After 30 years of 340B, it's time for data and an honest conversation

In a commentary published in STAT, NPC's John M. O’Brien outlines why transparency is essential to assessing the true impact of 340B. 

Read now

Facts & Stats

  • The 340B program is the second-largest federal prescription drug program, behind only Medicare Part D.15 
  • More than 50,000 covered entity sites participate in 340B.16 
  • Program participants included over 25,000 340B contract pharmacies in 2020.17  60% belonged to the five biggest pharmacy chains in 2018.18 
  • 63% of hospitals that receive 340B discounts have charity care rates below the national average.19 
  • $13 billion in estimated gross profits was generated by 340B covered entities and their contract pharmacies on 340B retail medicines in 2018 alone.20 
  • Many 340B contract pharmacies earn a profit margin of 15% to 20% from brand-name 340B prescriptions.21 
  • A 2021 industry report estimated duplicate discounts totaled between $933 million and $1.6 billion as of 2019.22 Duplicate discounts are prohibited and occur when both a 340B discount and Medicaid drug rebate are applied to the same pharmacy claim.

 

 

References

1 Martin, R. “340B Program Continues to Grow While Contract Pharmacy Restrictions Take Effect,” April 5, 2022, IQVIA https://www.iqvia.com/locations/united-states/blogs/2022/04/340b-program-continues-to-grow-while-contract-pharmacy-restrictions-take-effect 
2 Examining How Covered Entities Utilize The 340b Drug Pricing Program, Hearing Before the Subcommittee on Oversight and Investigations of the Committee on Energy and Commerce, House of Representatives. 115th Congress, First Session October 11, 2017 https://www.govinfo.gov/content/pkg/CHRG-115hhrg27577/html/CHRG-115hhrg27577.htm  
3 Mulligan, K. (2021 October 14). The 340B Drug Pricing Program: Background, Ongoing Challenges and Recent Developments. USC Leonard D. Schaeffer Center for Health Policy & Economics. Retrieved from https://healthpolicy.usc.edu/research/the-340b-drug-pricing-program-background-ongoing-challenges-and-recent-developments/ 
4 Mulligan, K. (2021 October 14). The 340B Drug Pricing Program: Background, Ongoing Challenges and Recent Developments. USC Leonard D. Schaeffer Center for Health Policy & Economics. Retrieved from https://healthpolicy.usc.edu/research/the-340b-drug-pricing-program-background-ongoing-challenges-and-recent-developments/https://healthpolicy.usc.edu/research/the-340b-drug-pricing-program-background-ongoing-challenges-and-recent-developments/
5 Health Resources and Services Administration (2010 March 5). Notice Regarding 340B Drug Pricing Program-Contract Pharmacy Services. Retrieved from https://www.federalregister.gov/documents/2010/03/05/2010-4755/notice-regarding-340b-drug-pricing-program-contract-pharmacy-services 
6 340B Drug Pricing Program, Health Resources and Services Administration, Retrieved from https://www.hrsa.gov/opa/index.html 
7 Mulligan, K. (2021 October 14). The 340B Drug Pricing Program: Background, Ongoing Challenges and Recent Developments. USC Leonard D. Schaeffer Center for Health Policy & Economics. Retrieved from https://healthpolicy.usc.edu/research/the-340b-drug-pricing-program-background-ongoing-challenges-and-recent-developments/ 
8 “Examining Hospital Price Transparency, Drug Profits, & the 340B Program,” Community Oncology Alliance, Retrieved from https://communityoncology.org/featured/hospital-340b-drug-profits-report/ 
9 Masia, N., Kuwonza, F. “Measuring the 340B Drug Purchasing Program’s Impact on Charitable Care and Operating Profits for Covered Entities,” Health Capital Group White Paper https://www.healthcapitalgroup.com/340b-profits-and-charity-care 
10 Tribble, SJ, Featherston, E. As Big Pharma and Hospitals Battle Over Drug Discounts, Patients Miss Out on Millions in Benefits. Retrieved from https://khn.org/news/article/340b-big-pharma-hospitals-battle-over-drug-discounts-patients-miss-out-on-millions-in-benefits/ 
11 United States Government Accountability Office (GAO). (2011 September). Manufacturer Discounts in the 340B Program Offer Benefits, but Federal Oversight Needs Improvement. Retrieved from https://www.hrsa.gov/sites/default/files/opa/programrequirements/reports/gaooversightneeded09232011.pdf 
12 U.S. House Committee on Energy and Commerce (2018). Review of the 340B Drug Pricing Program. Retrieved from https://republicans-energycommerce.house.gov/wp-content/uploads/2018/01/20180110Review_of_the_340B_Drug_Pricing_Program.pdf 
13 U.S. Government Accountability Office (GAO) (2018 July 18). Drug Discount Program: Federal Oversight of Compliance at 340B Contract Pharmacies Needs Improvement. Retrieved from https://www.gao.gov/assets/gao-18-480.pdf 
14 United States Government Accountability Office (2020). Drug Pricing Program. HHS Uses Multiple Mechanisms to Help Ensure Compliance with 340B Requirements. Retrieved from https://www.gao.gov/assets/gao-21-107.pdf
15 Vandervelde, A. “Measuring the Relative Size of the 340B Program,” June 2020, BRG, https://media.thinkbrg.com/wp-content/uploads/2020/06/17122436/BRG-340B-Measuring_2020_cleaned.pdf
16 Mulligan, K (2021 October 14). The 340B Drug Pricing Program: Background, Ongoing Challenges and Recent Developments. USC Leonard D. Schaeffer Center for Health Policy & Economics. Retrieved from https://healthpolicy.usc.edu/research/the-340b-drug-pricing-program-background-ongoing-challenges-and-recent-developments/ 
17 Mulligan, K (2021 October 14). The 340B Drug Pricing Program: Background, Ongoing Challenges and Recent Developments. USC Leonard D. Schaeffer Center for Health Policy & Economics. Retrieved from https://healthpolicy.usc.edu/research/the-340b-drug-pricing-program-background-ongoing-challenges-and-recent-developments/
18 U.S. Government Accountability Office (GAO) (2018 July 18). Drug Discount Program: Federal Oversight of Compliance at 340B Contract Pharmacies Needs Improvement. Retrieved from https://www.gao.gov/assets/gao-18-480.pdf 
19 Press Release: “NEW REPORT: 340B Hospitals Continue to Provide Below Average Rates of Charity Care,” Alliance for Integrity and Reform of 340B https://340breform.org/wp-content/uploads/2021/04/191113-Charity-Care-Report-Press-Release-NL-CH.pdf 
20 “For-Profit Pharmacy Participation in the 340B Program,” October 2020, Berkeley Research Group, LLC https://media.thinkbrg.com/wp-content/uploads/2020/10/06150726/BRG-ForProfitPharmacyParticipation340B_2020.pdf 
21 United States Government Accountability Office. July 2018. Federal Oversight of Compliance at 340B Contract Pharmacies Needs Improvement. https://www.gao.gov/assets/gao-18-480.pdf 
22 Making health policy work for patients: How platform solutions enable more affordable drugs. 2021 Annual Report. Kalderos. Retrieved from https://f.hubspotusercontent40.net/hubfs/7227094/2021%20Annual%20Report/Annual_report_2021.pdf