Empire State Today

Spending on prescription drugs purchased at participating health care providers through the federal 340b drug discount program increased 19% annually between 2010 and 2021.

That’s according to a Congressional Budget Office (CBO) report released June 17.

“Eighty-eight percent of the growth in 340B spending from 2010 to 2021 can be attributed to spending on drugs prescribed by hospitals and their affiliated off-site clinics,” said a presentation on the report provided by Rebecca Sachs and Joshua Varcie of the CBO’s Health Analysis Division.

New York has 11 hospitals participating in the 340b program, which is a federal initiative that enables eligible hospitals and healthcare organizations to purchase outpatient medications at significantly discounted prices.

Established in 1992 and administered by the Health Resources and Services Administration (HRSA) the program aims to provide financial relief to healthcare providers serving vulnerable populations, allowing them to stretch their scarce resources and reach more eligible patients.

Hospitals participating in the 340B program can use the savings to fund essential services and programs, such as free or low-cost medication assistance, expanded access to healthcare, and community outreach initiatives.

Participating hospitals, however, “often extend their 340B discounts to clinics in well-off communities, where they can charge privately insured patients more than those on Medicaid,” reported the Wall Street Journal.

“In some cases, the program appears to be bolstering profits in well-off areas more than it is underwriting services in less-privileged neighborhoods,” said the Journal article.

Dr. Anthony DiGiorgio, a neurosurgeon and senior affiliated scholar at the Mercatus Center at George Mason University, told Empire State Today that drug discounts often aren’t passed along from the hospitals to the patients.

“Because the discount is mandatory, many drugs come out with higher list prices than they normally would, but patients pay that copay at the higher list price,” he said. “Patients are actually paying more than they otherwise would if the 340b program didn't exist.”

The president of the National Pharmaceutical Council (NPC) said hospitals participating in the 340b program might not actually be receiving the intended discounts from that program.

“Patients aren’t seeing the discounted drug price passed to them at the pharmacy counter," NPC President Dr. John O'Brien told Empire State Today. "The growth in contract pharmacies has largely been in rich and white communities, and 340B hospitals are charging patients with commercial insurance more than non-340B hospitals.” 

The U.S. House Energy and Commerce Oversight and Investigations Subcommittee held a June 4 hearing on the 340b program. U.S. Rep. John Joyce (R-PA-13) said in during the hearing that the program’s growth has created “misaligned incentives” that are driving up patient costs. 

“This growth has created misaligned incentives across the entire health care system, leading to further consolidation that drives up prices for every patient,” said Joyce.