The 340B Drug Pricing Program was established in 1992 to benefit low-income and uninsured patients. Three decades later, the program has instead become a backdoor funding mechanism for hospitals and a slush fund for administrative services and pharmacy benefit managers, all of whom absorb the savings intended for patients.
Rather than focusing on communities in need of aid, the 340B program has expanded most in affluent areas. There, hospitals claim discounts on medicines for well-insured patients and then bill those patients full price – a practice known as “spread pricing.”
PBMs already contract with 340B pharmacies. This allows them the opportunity to use their usual tactics and administrative fees to absorb portions of the 340B savings. 340B lets them double dip – first through the normal rebates and again by pocketing the 340B discounts.
There are no requirements to track whether 340B discounts are passed on to the patients, or if the patients are even eligible. As a result, the program is disproportionately concentrated in wealthier communities, where profit margins are higher. Meanwhile, rural communities, seniors, Medicaid patients, and the uninsured are left with little to no benefit.
Despite the ongoing abuse of the system, the New York State Legislature is on the path to making matters worse with a bill that would prevent pharmaceutical companies from monitoring whether discounts reach patients. Instead of reining in misuse, this legislation will make abusing the 340B system easier for contract pharmacies in the state, driving up drug prices and higher health insurance premiums in the process.
The real losers when hospitals and PBMs raid the 340B coffers are low-income and uninsured patients who never see the discounts intended for them. Innovation suffers as researchers have less resources to develop and discover new medications.
Patients deserve to know how all manufacturers, PBMs, and hospitals are using – or abusing – a program created to help the most disadvantaged populations, not enrich wealthy institutions.
Justin Leventhal is a senior policy analyst for the American Consumer Institute, a nonprofit education and research organization that advocates for consumers through evidence-based analysis and data. For more information about the Institute, visit www.TheAmericanConsumer.Org or follow us on X @ConsumerPal