The 340B Drug Pricing Program is Overdue for Reform

Background:

  • The 340B Drug Pricing Program was created in 1992 and requires manufacturers participating in Medicaid to sell drugs at a 20 to 50 percent discount to “covered entities,” including non-profit hospitals and federally funded health clinics.
  • The legislation did not define a patient or require the savings to be passed on to them. 
  • The failure to include those requirements has led to a broad interpretation of eligibility and allowed the program to be used to inflate the profits of hospitals and pharmacies rather than providing discounts to patients.  

The Problem:

  • According to the Health Resources & Services Administration, in 2005, 340B covered entities purchased .4 billion in drugs, and in 2023 purchases had increased by 2,500 percent to 6.3 billion, making it the second largest federal prescription drug program after Medicare.
  • A June 5, 2015, Government Accountability Office report determined that in both 2008 and 2012, Medicare Part B drug spending was much higher at 340B disproportionate share hospitals than at non-340B hospitals, and in 2012, per beneficiary spending at the DSH hospitals was 44 compared to 0 at the non-340B hospitals.
  • A May 2024 Health Capital Group report found that the increased participation in 340B between 2014 and 2021 raised Medicaid spending by 91 per enrollee, or more than 2 billion annually, accounting for approximately 10 percent of total Medicaid spending.
  • A September 2022 Community Oncology Alliance report found that 340B acute disproportionate share hospitals prescribe more expensive medicines than non-340B hospitals, including charging more than five times the acquisition cost for oncology drugs.
  • A March 2024 IQVIA report found that 340B increases costs by more than billion annually for employer health plans regulated under ERISA.  
  • The 340B program caused an estimated loss of .8 billion in federal and state tax revenue and increased costs by .8 billion for self-insured and fully insured employers and employees in 2021.
  • Due to Congress’s inaction, state legislatures have passed legislation that creates a patchwork of laws regulating how 340B operates across the country. 

What Congress Can Do:

  • Since 340B was created by a federal statute, permanent changes can only be made by Congress.
  • An April 24, 2025, Senate Health, Education, Labor and Pension Committee Majority Staff report on the 340B drug pricing program includes a recommendation to clarify the definition of an eligible patient and ensure that the discounts benefit those patients.
  • 340B reforms should include a clear definition of a 340B eligible patient, better verification of patient eligibility at the time the prescription is filled, a relationship between the patient and the covered entity, verification that services were provided within the past 12 months, and increased transparency.