Hospitals Abuse 340B Program at the Expense of Vulnerable Patients
The WasteWatcher
Patients across the country are receiving hospital care not knowing if they will get stuck with enormous and unexpected bills when they are released. A January 15, 2025, New York Times article described how Virginia King, a patient in Santa Fe, New Mexico received a $22,700 medical bill for a drug that would slow damage to her spine from metastatic breast cancer. Even though the drug list price was $2,700, the hospital that owned the cancer center billed Mrs. King’s insurance the $22,700, her insurer paid $10,000, and Mrs. King was charged more than $2,500 which is more than half her take-home pay for a month.
The charges to Mrs. King were a result of significant abuse of the federal 340B drug discount program, which has enabled hospitals, contract pharmacies, and other providers who participate in the program to put profits above patients. Mrs. King fell victim to this scheme by unknowingly visiting a 340B hospital.
Congress created 340B in 1992 to fix a problem it had created two years earlier when an overreaching government implemented price controls in the Medicaid drug benefit program. As a condition to participate in Medicaid, pharmaceutical companies are required to participate in the 340B program and give discounts of between 20-50 percent to certain federally funded healthcare facilities and disproportionate share hospitals (DSH) known as “covered entities” that serve large numbers of low-income and uninsured patients. The savings from the program are intended to go to patients that qualify. But the lack of a clear definition of patient among other shortcomings has allowed the program to grow exponentially and be subject to substantial abuse.
In 2014, 340B discounted purchases were $9 billion, but by 2020, they reached $38 billion, or 322 percent more than in 2014, and a 27 percent increase from the $29.9 billion spent in 2019. The healthcare data analytics firm IQVIA released its 2023 annual study, “The 340B Drug Discount Program Grew to $124B in 2023,” which provides further evidence exposing the exploitation of the program. The report found that the misuse of the funds by hospitals and contract pharmacies is ongoing, and patients are still not getting the benefits Congress intended them to receive.
The January 15, 2025 Times article described how prescription drug spending on state employees in North Carolina increased “almost 50 percent from 2018 to 2022. A report in May from the state treasurer’s office found that 340B was partly to blame: Hospitals that participated in the program billed the state health plan far more than hospitals that did not — almost 85 percent more for certain cancer drugs. In one example, hospitals bought a drug commonly used to treat melanoma for an average of $8,000 but billed the state $21,512.”
Hospitals that participate in the 340B program are not required to demonstrate how they use savings from 340B discounts to increase care for low-income patients. Participants in the program must be more accountable and transparent. And Congress must adopt long overdue reforms to end the abuses and provide a clear definition of a patient. The program is a good example of the kind of inefficiency that needs to be considered by the Department of Government Efficiency.