Reforming 340B To Help Patients In Need

Congress created the 340B drug discount program in 1992 to help vulnerable or uninsured patients gain better access to prescription medicines. Though well-intentioned and needed, the program has since strayed away from its original intent. The Pharmaceutical Research and Manufacturers of America (PhRMA) and its members support the original intent of the program and are committed to working with Congress and the Administration to reform the 340B program to ensure it reaches the vulnerable patients it was intended to help.

What critics fail to mention in their attacks on the 340B program, is that it has become unmoored from its core mission. Today, large hospitals and health systems are too often the ones realizing the benefits of this program – instead of patients.  We want 340B to meet its intended public health objective of helping patients in need, so we believe that reform is necessary to encourage greater transparency, accountability and oversight.

The biopharmaceutical industry’s call for 340B reform is intended to shine a spotlight on those hospitals that exploit the federal program without serving those in greatest need. Growth in the 340B program is being fueled by several factors, including increasing numbers of hospitals qualifying for the program, hospital acquisitions of physician clinics, and a policy that allows discounts to be shared with outside contract pharmacies.

Currently about one-third of all hospitals qualify for 340B. This is a far cry from the original intent of the program, which was to target safety net hospitals serving large numbers of uninsured and vulnerable patients. While there are some 340B hospitals serving a true safety net population, recent analysis shows that a small number of 340B hospitals are providing the bulk of charity care.  In fact, approximately one-fifth of 340B hospitals provide 80 percent of all charity care delivered by 340B hospitals, even though these hospitals account for less than half of all 340B beds.  For more than two-thirds of 340B hospitals, charity care as a percent of patient costs is less than the national average of 3.3 percent for all hospitals. Paradoxically, as more patients gain health insurance coverage through Medicaid under the Affordable Care Act, more hospitals will qualify for 340B because the current rules tie eligibility in part to the share of a hospital’s patients that have Medicaid. By contrast, other clinics and providers must meet defined goals to ensure 340B savings are used to benefit vulnerable and uninsured patients.

Under current rules, hospitals are able to purchase community physician clinics in order to obtain 340B discounts for patients treated by those doctors. Patients may not notice any change in the care they receive, but studies from Berkeley Research Group, Avalere Health and the Moran Company have found that these clinic drug purchases translate into higher costs for insurers and patients. At the same time, hospitals may be gaining additional revenue by obtaining 340B discounts that are often not passed onto patients.

Compounding these trends, a 2010 revision to 340B’s rules has further allowed hospitals to profit off 340B with no guaranteed benefit for patients. This change allows hospitals and other 340B entities to obtain 340B discounts for prescriptions filled at an outside or “contract” pharmacy. This change was originally implemented to help small clinics without an in-house pharmacy to lower access barriers for needy patients, but it is hospitals that are the primary beneficiary of this fundamental change in how the program operates.

Recent research shows many large hospitals aggressively use contract pharmacies with 43 percent having more than 20.


By contrast, the safety-net clinics that qualify for 340B discounts are much less likely to benefit from the contract pharmacy program with less than 2 percent of all grantees having more than 20 contract pharmacies.

As part of their federal grants, these clinics are typically required to reinvest revenue from 340B discounts into services for vulnerable patients. However, hospitals in the 340B program face no such requirements related to how revenue from 340B is used. This means the entities that are contributing to unsustainable program growth are less likely to pass along that benefit to needy patients, while the vast majority of the clinics dedicated to serving vulnerable populations get no benefit from the program at all.

That’s hardly fair.

We can all agree that 340B program is an important program for helping patients access prescription medicines. But in order for it to truly assist those it is intended to serve, it is time for us all to work together to reform and strengthen the program so that it does just that.



Lori Reilly is Executive Vice President for Policy and Research at the Pharmaceutical Research and Manufacturers of America (PhRMA)

Morning Consult