The 340B Drug Discount Program was created to improve access to medications for low-income patients. But, like too many well-intentioned federal programs, it has grown beyond its original purpose. It is now being exploited in ways that do little to support patients and instead enrich many not-for-profit hospitals and intermediaries across the supply chain while driving up costs for employers and working families.
Under 340B, drug manufacturers must sell drugs at steep discounts — 20 to 50% — to certain qualifying hospitals and clinics, which then sell them to low-income patients at a reduced rate. While this sounds reasonable in theory, the federal law does not define who counts as a patient.
As a result, many not-for-profit hospitals and their contract pharmacies are using the program to generate millions in revenue by selling the 340B drugs to patients covered by employer-sponsored health coverage at high retail prices. Employers are unable to receive rebate payments for these drugs because the hospitals acquired them at the 340B discounted rate.
The unchecked growth of the program has come at a high cost to taxpayers and employers. According to a May 2024 Health Capital Group report, increased 340B participation from 2014 to 2021 raised Medicaid spending by $391 per enrollee, or $32 billion annually. Employers and working families are also bearing the costs of 340B. A March 2024 IQVIA report found that 340B increases costs by more than $5 billion for employer-sponsored health plans.
For employers in Florida, 340B costs working families $246 million each year.
The abuses of the 340B program by many hospitals have been highlighted in myriad investigations and reports. A recent report by the Congressional Budget Office found that the “340B program encourages behaviors — including the prescription of more and higher-priced drugs, the expansion of services, and the integration of hospitals and off-site clinics.”
As a federal program, 340B reform must be enacted by Congress. But while Washington drags its feet, some states are stepping in, and not always in the right direction. Florida can take a page from states like Minnesota and Indiana, which have focused on accountability rather than expansion. Their reports show who really benefits from 340B discounts and reveal when hospitals are using the program more to pad budgets than to help patients. For example, a Minnesota Department of Health report found that just 13% of hospitals received 80% of all 340B benefits, leaving smaller hospitals struggling to keep up.
Florida should resist expanding 340B and instead push for policies that shine a light on how the program is used. At the same time, Congress should pass meaningful reforms, including a clear definition of eligible patients and stricter rules to ensure 340B savings actually benefit the people the program was meant to serve.
___
Karen L. van Caulil, Ph.D., is the Executive Director of Floridians for Accountability in Health Care. Doug Wheeler is the Director of the George Gibbs Center for Economic Prosperity at The James Madison Institute.
