Neal Masia, adjunct professor of business and economics at Columbia University, said on March 25 that recent research indicates the expansion of the 340B Drug Pricing Program is being driven primarily by large teaching hospitals rather than smaller community-based providers, as similar concerns arise in California and other states.
“Participating entities purchased $81.4 billion in medicines in 2024, a 23% increase over the previous year and a whopping twelve times the size of the program in 2010. The growth begs the question – where are the tens of billions of dollars generated by this program coming from, and where are they going? Effectively, 340B has become a drug mark-up program. Hospitals buy drugs at low cost and sell them high – and are incentivized to do so as often as possible,” Masia said, according to RealClearHealth.
The 340B program was created to help eligible safety-net providers stretch federal resources and serve more patients, but its financial footprint has expanded significantly. Covered entities bought $81.4 billion in outpatient drugs through the program in calendar year 2024, according to the Health Resources & Services Administration. That makes 340B one of the largest federal drug-purchasing channels — and raises questions about who benefits from it.
Masia also said that “340B is not correlated with a positive impact on charity care. More than half of 340B hospital systems have rates of charity care below the national average of 2.15% of operating expenses. There are no limitations on how hospitals use the money they reap from 340B and no reporting requirements.”
The topic has drawn attention from policymakers. On Feb. 2, Senate Health, Education, Labor and Pensions Committee Chair Bill Cassidy said a “serious lack of transparency” in the 340B drug program prevents discounts from translating into “better access or lower costs for patients.” He requested information from Apexus, the 340B prime vendor, regarding how it generates revenue and structures its business practices.
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.
Neal Masia, a health economist, is an adjunct professor at Columbia Business School and has held roles in academia, industry, and policy. He previously spent nearly 18 years at Pfizer, including as chief economist and vice president of patient and health impact, and has also worked at the Congressional Budget Office.
