RealClear Health: If Lawmakers Don’t Clean Up 340B, Elon Musk Might

By Kasia Mulligan, Patients Come First’s National Spokesperson

If cracking down on abuse of government programs is a tenet of the next Administration, a lesser-known but rapidly growing healthcare program—to the tune of $66.3 billion last year—has the potential to be thrust center stage

The 340B Drug Pricing Program, thirty-two years old this month, was originally designed to financially aid vulnerable patients by requiring drug manufacturers to provide substantially lower-cost drugs to eligible healthcare providers, such as Disproportionate Share Hospitals that serve lower-income patients.

Growing evidence shows that these hospitals are pocketing the profits instead of passing these savings on to the patients who need them most. In fact, these hospitals have a payday with this program, which is estimated to have generated over $54 billion in profit in just one year. 

Despite many of the 340B participants being caught red-handed directing profits to unrelated expenses—not to patients—they’ve continued using this program as a profit machine because regulators haven’t been able to get a grasp on the extensiveness of their abuse. 

Since 2010, the program has exploded in size, growing by nearly 500 percent, with over 25,000 contract pharmacies now participating. One of the program’s intended goals was to provide affordable medicines to Medicaid patients in regions that were often care deserts so it could fill the gap where Americans either had no care options or couldn’t afford to travel.

However, this isn’t the current reality of the program, with less than half of the participating hospitals located in the medically underserved areas where the program was designed to benefit.

Not only is the program a profit machine that’s not reaching its intended patient population; it also lacks stringent reporting requirements that show whether discounted drugs are ending up in low-income patients’ hands. This has allowed the program to expand without regulation, often benefiting hospitals and third-party players like pharmacy benefit managers (PBMs) and insurers, while patients receive little to no direct savings.

Rather than making medications more affordable, these current flaws in the program are leaving patients with fewer options and higher costs in the long run as hospitals continue to exploit the 340B program for financial gain.

Theoretically, the federal government is very aware of these abuses. In fact, the Health Resources and Services Administration (HRSA), which oversees the 340B program, audited 1,240 hospitals and clinics between 2012 and 2019 and found that at least one-third were defying program rules. Even more concerning, 429 of those audits revealed that hospitals took advantage of duplicate discounts, further straying from the program’s original intent.

Some have had enough, with one pharmaceutical company aiming to hold hospitals accountable by proposing a shift from upfront discounts to rebates. This approach would ensure that patients, rather than hospitals and middlemen, receive the benefits.

Despite this proposal's potential benefits, the current government has threatened these reform efforts, putting the very patients the program was meant to serve at risk. If the government had moved forward with barring pharmaceutical manufacturers from the program, many Medicaid patients could have lost access to essential medications.

So why oppose a plan that would bring transparency and ensure patients benefit directly? It raises the question: who is truly being served by this system?

Read the full op-ed in RealClear Health.