Golden State Today

Citizens Against Government Waste (CAGW) said that hospitals and other “special interests,” rather than patients, are benefiting from a federal drug discount program in which up to 74 California hospitals participate. 

“Taxpayers are footing the bill for the 340B Drug Pricing Program—while hospitals, contract pharmacies, and special interest sharks profit,” CAGW posted on X. “They’re taking advantage of 340B discounts meant for patients, and it’s costing taxpayers millions.”

"The 340B program must strongly define patient eligibility and enforce strict accountability measures to enhance transparency," said a CAGW website to which the X post linked.

Established in 1992 and administered by the Health Resources and Services Administration (HRSA) the program aims to provide financial relief to healthcare providers serving vulnerable populations, allowing them to stretch their scarce resources and reach more eligible patients.

Hospitals participating in the 340B program can use the savings to fund essential services and programs, such as free or low-cost medication assistance, expanded access to healthcare, and community outreach initiatives.

In California, 174 hospitals participate in the program, reported Golden State Today on February 27.

Participating hospitals, however, “often extend their 340B discounts to clinics in well-off communities, where they can charge privately insured patients more than those on Medicaid,” reported the Wall Street Journal.

“In some cases, the program appears to be bolstering profits in well-off areas more than it is underwriting services in less-privileged neighborhoods,” said the Journal article.

The head of the California-based Pacific Research Institute (PRI) said Congress should provide more oversight over the fast-growing federal 340b drug discount program. 

“The basic mechanism of 340B is to give drug discounts to hospitals with large populations of poor and uninsured patients so that the facilities can charge these patients little or nothing for their medicine,” wrote Sally Pipes, president and CEO of PRI, in an op-ed at The Well. “The Centers for Medicare and Medicaid Services then reimburse the hospitals at full price. They’re supposed to use the difference to fund free care and services for low-income people.”

“But lawmakers, operating in their usual alternate reality, didn’t include any plan for oversight or enforcement,” wrote Pipes. “ As a result, hospitals have simply turned the program into a revenue stream.”

Pipes wrote that the program, since it’s founding, has expanded “beyond all reason.”

Spending on prescription drugs purchased at participating health care providers through the 340b program increased 19% annually between 2010 and 2021, according to a Congressional Budget Office (CBO) report released June 17.

“Eighty-eight percent of the growth in 340B spending from 2010 to 2021 can be attributed to spending on drugs prescribed by hospitals and their affiliated off-site clinics,” said a presentation on the report provided by Rebecca Sachs and Joshua Varcie of the CBO’s Health Analysis Division.

The president of the National Pharmaceutical Council (NPC) said hospitals participating in the 340b program might not actually be receiving the intended discounts from that program.

“Patients aren’t seeing the discounted drug price passed to them at the pharmacy counter," NPC President Dr. John O'Brien told LAX Leader. "The growth in contract pharmacies has largely been in rich and white communities, and 340B hospitals are charging patients with commercial insurance more than non-340B hospitals.” 

The U.S. House Energy and Commerce Oversight and Investigations Subcommittee held a June 4 hearing on the 340b program. U.S. Rep. John Joyce (R-PA-13) said in during the hearing that the program’s growth has created “misaligned incentives” that are driving up patient costs. 

“This growth has created misaligned incentives across the entire health care system, leading to further consolidation that drives up prices for every patient,” said Joyce.