The American Legislative Exchange Council (ALEC) said in a March 9 article that the federal 340B Drug Pricing Program raises costs for taxpayers and patients and often fails to target the underserved communities it was intended to help, as similar concerns continue to grow in California.
The discussion comes as policymakers continue to debate the effectiveness of the 340B program, which requires drug manufacturers participating in Medicaid to sell certain outpatient drugs at discounted prices to eligible hospitals, clinics, and other covered entities. The Health Resources and Services Administration says the program is intended to help participating providers stretch scarce resources and support patient care, according to HRSA.
In its analysis, ALEC contends the program carries broader costs, citing IQVIA research estimating about $1 billion in annual added costs for state employee health plans. The group also references Congressional Budget Office findings that the program may increase federal spending through changes in rebate dynamics and prescribing incentives. The article also points to cost impacts beyond manufacturers, stating that patients and employer-sponsored health plans may pay more.
Citing IQVIA data, it notes workers and their plans spent about 12% more than they otherwise would have, while some patients faced higher out-of-pocket costs when cost-sharing exceeded discounted drug prices. ALEC further argues that expansion of the program has not consistently reached the most vulnerable communities. Referencing outside research, including a study published in JAMA, the article states the share of 340B contract pharmacies in the lowest-income neighborhoods declined by 5.6%, while non-340B pharmacies in those areas increased by 1.3%, according to ALEC.
In California, charity care averages just 1.7% of total operating costs at 340B hospitals, according to PhRMA’s California state profile, and 83% of those hospitals fall below the national hospital average. The report also found that from 2014 to 2022, assets rose 73% while charity care dropped 49%, fueling concerns that financial growth is outpacing patient benefit.
The American Legislative Exchange Council is a nonprofit membership organization founded in 1973 that says it brings together state legislators and other stakeholders to advance policy rooted in limited government, free markets, and federalism. ALEC publishes model policies, research, and issue-based resources intended to help lawmakers develop state-level legislation across a wide range of policy areas, according to the organization.
