As part of drug manufacturer participation in Medicaid and Medicare, the 340B Drug Discount Program requires manufacturers to provide steep discounts on outpatient drugs to certain covered entities that deliver care to vulnerable populations, also known as safety net providers.

Program Lacks Controls and Transparency

1. The 340B Program is fundamentally broken and is not serving patients in the way that was intended.

  • Established in 1992, the 340B program’s limited purpose was to restore outpatient drug discounts to specified safety net providers—covered entities—that directly purchased and dispensed drugs to their own patients, without having those discounts affect the Medicaid best price calculation.
  • The 340B Program has grown out of control as pharmacy chains and health systems have used it as a profit driver. The rapid growth in 340B contract pharmacies and related pharmacy and health system revenues has not led to a significant increase in charity care.1
  • 340B covered entities, including many hospitals, purchase drugs at significant discounts but bill patients and insurers at higher prices. Increasingly, many covered entities use contract pharmacies and split the financial windfall rather than passing on cost savings to patients.
  • We support the original intent of the 340B program and believe increased transparency and accountability in the program will improve access to care in vulnerable communities. Program reforms should also protect against diversion and duplicate discounts, which occur when a 340B drug is submitted for another rebate–causing the drug manufacturer to pay multiple discounts on the same drug.

2. The lack of transparency in the 340B Program makes it unclear whether vulnerable patients are benefiting from 340B discounts.

  • The 340B Program now represents nearly one out of every five dollars of the total manufacturer rebates and discounts provided each year.1
  • However, independent research was unable to find a link between hospitals’ 340B participation and expanded charity care in vulnerable communities.1

3. As the 340B Program grows each year, increased discounts reduce the resources available for future investments in tomorrow’s treatments and cures.

  • Total 340B sales grew to more than $124 billion in 2023 – this represented 129.4% growth since 2018 – more than triple the growth rate of non-340B sales.2
  • Annual 340B discounts from Johnson & Johnson alone grew over 200%, from $2 billion in 2016 to $6.2 billion in 2022.3
  • Research shows that 340B mark-ups harm pharmaceutical innovation and burden patients.4

4. Where we stand: With more transparency and accountability within the 340B Program, patients could directly benefit from discounts, and more resources would be available to invest in innovative treatments.

  • Policymakers should take steps to eliminate duplicate discounts and diversion. The lack of transparency in the program limits stakeholders’ ability to monitor for duplicate discounts and diversion.
  • Policymakers should reform the program to require that 340B discounts be shared directly with needy patients at the pharmacy counter.

 

3 Things to Know

340B hospitals billed the North Carolina State Health Plan an 84.8% higher price markup than non-340B hospitals for oncology drugs, according to an analysis of medical claims from the North Carolina State Health Plan for Teachers and State Employees from 2020 to 2022.5

12x more pharmacy contracts 340B profits for providers and their contract pharmacies have increased 12x since 2013.The 340B Program was never intended to subsidize retail pharmacy chains.1

Only 42% of profits towards charity care In 2022, hospitals serving low- income patients made $44B in 340B profits but allocated only 42% of profits towards charity care. 340B profits exceeds charity care for a staggering 85% of these 340B entities.6

 

References

1. Johnson & Johnson. The 340B Program: How Arbitrage, Opportunism and Opacity Undermine the Program’s Original Purpose. 2. IQVIA, The 340B Drug Discount Program Grew to $124B in 2023, https://www.iqvia.com/-/media/iqvia/pdfs/us/white-paper/2024/iqvia-update-on-size-of-340b-program-report-2024.pdf. Published May 10, 2024. Accessed May 24, 2024. 3. Janssen Transparency Report. Published 2022. Accessed April 1, 2024. https://transparencyreport.janssen.com/_document/the-340b-report-how-arbitrage-opportunism-and-opacityundermine-the- programs-original-purpose?id=00000184-8268-d0e5-a59c-e7e876260000 4. Hospitals’ Drug Price Markups Incentivize Consolidation and Reduce Funding for Pharmaceutical Innovation. Health Affairs. Published March 6, 2024. Accessed May 24, 2024. https://www.healthaffairs.org/content/forefront/hospitals-drug-price-markups-incentivize- consolidation-and-reduce-funding 5. North Carolina State Treasurer, “Overcharged: State Employees, Cancer Drugs, and the 340B Drug Pricing Program.” https:// www.shpnc.org/documents/overcharged-state- employees-cancer-drugs-and-340b-drug-price-program/download?attachment. Published May 8, 2024. Accessed May 24, 2024. 6. DSH Hospitals’ 340B Profit Often Exceeds Charity Care Spending. AIR340B. Published March 2024. Accessed May 24, 2024.