Prescription drugs and opioids on table top viewing up close.
The federal 340B drug pricing program is failing to meet the needs of the vulnerable patients the program was intended to serve, while raising health care costs for employers and families, according to a new white paper.
“The 340B program is raising health care expenses for employer-sponsored health plans by $5.2 billion annually through the loss of rebates,” said Ilyse Schuman, senior vice president, health and paid leave policy, for the American Benefits Council. “But the costs don’t end there. Exponential growth of the program is also fueling hospital and provider consolidation, which further contributes to health cost inflation, and promoting increased use of higher-cost therapies.”
Recommended For You
The council’s white paper explores the exponential growth of program, driven by multiple factors, including an increase in hospital-affiliated offsite outpatient departments. The 340B program was enacted in 1992 to help expand services and make health care more affordable for vulnerable patients treated at specific facilities. Prescription drug manufacturers must provide discounts on outpatient prescription drugs for “eligible patients” to “covered entities” that meet statutory eligibility criteria and register for 340B.
For almost two decades, the 340B program remained relatively small. However, the program has grown rapidly in recent years, particularly after 2010, and now accounts for nearly $1 of every $5 spent on brand outpatient medicines. Total sales at the 340B discounted price reached $66 billion in 2023, which when measured at the undiscounted list price, is equal to an estimated $124 billion in drug spending. In just 10 years, annual 340B purchases grew more than 700%, from $7.5 billion in 2013 to $53.7 billion in 2022. Factors underlying this growth include.
- Exponential growth in participation by non-profit hospitals.
- Hospital/provider consolidation and proliferation of offsite outpatient departments or “child sites”
- Increases in contract pharmacy arrangements.
- A vague definition of “eligible patient.”
- Lack of transparency and lax oversight of covered entities, especially hospitals, by the Health Resources and Services Administration.
“This reduction in negotiated rebates results in higher costs for employer health plans,” said Dan Crippen, former Congressional Budget Office director. “Some employers pass the additional costs to employees in the form of reduced benefits, higher premiums and more out-of-pocket costs,” “Due to these increased costs, employees and employers have less taxable income, resulting in lower federal and state tax revenue.”
The council recommends several measures to reform the program.
- Increase transparency, accountability and oversight.
- Codify a clear 340B “patient” definition to ensure program integrity.
- Strengthen the eligibility criteria for 340B hospitals.
- Create clear standards for “child sites.”
- Create clear criteria for contract pharmacy arrangements.
© 2025 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
Alan Goforth
Alan Goforth is a freelance writer in suburban Kansas City. In addition to freelancing for several publications, he has written a dozen books about sports and other topics.
