Golden State Today

Sally Pipes, the director of the Pacific Research Institute (PRI) in California, said the current system of the 340B drug program, meant to decrease prices for patients, is not sufficiently monitored and, as a result, is not benefitting patients as intended. 

"Because the alleged behavior of many 340B hospitals is well-documented by government oversight agencies, raises patient and taxpayer costs, and boosts hospital profits, the current iteration of 340B ultimately detracts from the stated mission of the program," Pipes wrote in a recent Forbes op-ed. "Federal law doesn't allow for 340B and Medicaid discounts to be paid on the same medicine. But that seems to be what's happening."

"Many hospitals and federal grantees are buying drugs at a discount, and state Medicaid programs are collecting hefty rebates for the same medicines given to the same patient," Pipes said. "Thanks to the lack of transparency in the program, it's impossible to know just how widespread this double-dipping is.

Johnson & Johnson (J&J) company recently proposed a change to how it would offer discounted prices on two drugs through the 340B program, giving patients discounts as retroactive rebates instead of upfront discounts for two medications given in hospitals that participated in the program. The move was to increase transparency of the program, J&J reported. 

"Officials at the Health Resources and Services Administration (HRSA), who run the program, blew a gasket," Pipes wrote. "HRSA, whose mission is to provide 'equitable health care to the nation's highest-need communities,' effectively announced that unless J&J backed down, the agency would kick the drug maker out of Medicare and Medicaid."

J&J did not move forward with the proposal as a result. 

The 340B drug pricing program was created in 1992 to support uninsured or low income patients by enabling 340B covered entities like hospitals or health care organizations to purchase drugs for eligible patients at lower costs, passing on those savings to the patients. Since inception, there has been little oversight added to the program, leading to hospitals and health care institutions pocketing the savings instead of lowering costs for patients

The 340B ACCESS Act was proposed to address these issue, and would add new requirements for transparency and eligibility to protect 340B patients. The legislation provides a clear definition of which patients are 340B eligible as well as a detailed list of requirements for hospitals to be eligible for participating in the 340B program. 

"The problem is only going to get worse as the Inflation Reduction Act is fully implemented and price controls, starting with 10 drugs under Medicare Part D in 2026, roll through the system," Pipes said. "The IRA pours fuel on the fire with another government-mandated price, where duplication is illegal."

The Inflation Reduction Act (IRA), signed into law by President Joe Biden (D) in 2022, contains a drug provision in which the brand-name drugs for which Medicare "negotiates" prices are split into two categories: small-molecule drugs and biologics. 

The IRA makes small-molecule drugs eligible for "negotiation" nine years after their approval, compared to a 13-year exemption period for biologics.

An October 2023 paper, authored by University of Chicago economists, said that the IRA small molecule provision will result in “188 fewer small molecule treatments, including 79 fewer new small molecule drugs and 109 fewer post-approval indications for these drugs.”

Studies from the U.S. Chamber of Commerce predicted 29% to 44% fewer medicines produced across all therapeutic areas, including cancer, as well as a 60% decrease in cancer research.