340B Is Meeting the High Standard Congress Set

When a bipartisan group of lawmakers sat down to write the legislation that would become the 340B drug pricing program, they were addressing a worrisome health system issue. The prices of many prescription drugs were escalating and causing a financial burden for nonprofit hospitals, health centers and public health clinics that served a significant share of patients with low incomes. The 340B program was an elegant solution to that problem.

Recognizing that public insurance programs such as Medicaid were dramatically under-reimbursing these hospitals for their services, policymakers sought to shore up providers who had a large caseload of patients with low incomes by requiring drug companies to sell certain outpatient drugs to them at discounts that generate savings for providers. In return, drugmakers were guaranteed access to the enormous Medicaid and Medicare markets.

Nearly 30 years later, 340B has proven to be one of the most successful policies adopted to protect the safety net. Without relying on a single taxpayer dollar, 340B enables these providers to “stretch scarce federal resources as far as possible, reaching more eligible patients and providing more comprehensive services.” It is doing exactly as Congress intended.

To qualify for 340B discounts, most hospitals must meet a set of strict eligibility standards. The most prominent standard is that they must serve a large percentage of Medicaid and low-income Medicare patients. In 2010, lawmakers extended the 340B discounts to hospitals serving rural communities, where the relative scarcity of patients often made it difficult for hospitals to keep their doors open for all in need. We know from published research that Medicaid patients have a higher burden of illness and that Medicaid payment rates are below health delivery costs, creating financial challenges for 340B hospitals treating large numbers of those patients.

To see whether 340B is meeting the purposes Congress established, we look to the literature — research studies and reports by key government agencies and private researchers. There is a preponderance of evidence that 340B works as intended:

  • In 2018, the Government Accountability Office found that 340B disproportionate share hospitals provided higher amounts of uncompensated care than non-340B hospitals.
  • Subsequent analysis found that 340B DSH hospitals provide 75 percent of Medicaid hospital care, despite making up only 43 percent of acute care hospitals. That same study found that low-income patients treated by 340B DSH hospitals represent 40.6 percent of total patient load compared with 26.3 percent for non-340B hospitals.
  • The Medicare Payment Advisory Commission found the proportion of low-income cancer patients is 50 percent higher for 340B hospitals than for non-340B hospitals.

In addition to serving patient populations that are more costly to treat, 340B hospitals are much more likely to provide such highly specialized but under-reimbursed services as burn and trauma care. And they are more likely to provide services that often are not reimbursed at all, including such life-saving care and support as case management, medication therapy management, social services and programs to address social determinants of health. While these expenses do not appear on hospitals’ annual Medicare cost reports, they amount to better care and better health outcomes.

When it comes to rural hospitals, 340B savings are often the difference between staying open to care for patients or closing, eliminating care and jobs from communities that desperately need both. Since 2005, 181 rural hospitals have closed, with 138 of those closures occurring since 2010. Small rural hospitals rely on 340B, with 74 percent of those hospitals reporting that the savings from 340B discounts enable them to stay in operation.

Of course, the true measures of success are the millions of patients whose lives and health status are better thanks to 340B, whether they are aware of its existence or not. Take, for example, the story of Jennifer Gallagher of Pueblo, Colo. A childhood case of rheumatic fever left her with a heart murmur and scarred her lungs. Her fragile health led to frequent hospital stays and significant medical expenses. In 2013, Jennifer underwent open-heart surgery at Parkview Medical Center, and she was prescribed ongoing therapy with the blood thinner Coumadin. Thanks to 340B, Parkview can provide her with the drug at a heavy discount, in addition to the wide range of specialized medical care she needs. If that care and assistance were not available, Jennifer says she would be unable to keep working as a pharmacy technician at Parkview.

The future benefit of the program to patients such as Jennifer — and those whose lives have yet to be touched by 340B — depends in large part upon the extent to which policymakers continue to protect the program from multiple threats. The body of 340B research tells a powerful story, and the patient care victories tell one that is even more powerful.


Maureen Testoni is the president and CEO of 340B Health, which represents more than 1,400 hospitals participating in the 340B drug pricing program.

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