Putting profits over patients.
- Food & Drug Law Institute 2022
The 340B drug program was created by congress in the 1990s to stretch thin federal health care dollars and improve the quality of care provided to poor and underserved communities.
The program started simply. Drug companies that sell to Medicaid were required to also participate in 340B and required to sell deeply discounted drugs to 340B designated hospitals and clinics.
The designated 340B hospitals and clinics were supposed to use the savings generated by the program to provide discount drugs and improved care to their patients... At first, the program was working great...
Then Wall Street figured out that there were huge profits to be made by taking the 340B discount drugs meant for charity... and instead selling them at full price across town through the use of contract pharmacies. Today some of the largest Fortune 100 companies in the U.S. are improperly profiting from this program meant for charity care.
A good idea gone bad.
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Follow the Money
Profits have soared. Charitable care has not.
Hospital systems have come to treat 340B less as an assistance program and more as a profit center. This is possible because under current law, providers are under no obligation to reserve the discounts for needy patients or even report what they do with the savings. Just the opposite is happening. Eligible hospitals will obtain all their 340B medications from a drugmaker at the discounted 340B price and then bill privately insured patients—and even uninsured patients—for the drug’s full list price, helping themselves to the difference as pure profit.
Consequently, most prescriptions filled at contract pharmacies are dispensed to patients who have prescription drug insurance—not to uninsured or financially needy patients.[7] That’s why Medicare and other third-party payers end up being responsible for the balance of the profit earned by a 340B covered entity and the contract pharmacy. In the real world, this is called stealing.
The 340B Drug Pricing Program is now the second-largest government pharmaceutical program, based on net drug spending. But unlike such programs as Medicare Part D and Medicaid, 340B lacks a regulatory infrastructure, well-developed administrative controls, and clear legislation to guide the program.
For 2021, discounted purchases under the 340B program reached a record $43.9 billion—an astonishing $5.9 billion (+15.6%) higher than its 2020 counterpart. Hospitals accounted for 87% of these skyrocketing 340B purchases.[4]
Astounding Growth
The chart below documents the 340B program’s exponential growth.
