Congress created the 340B drug discount program 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 significant discounts of between 20-50 percent to certain federally-funded facilities and disproportionate share hospitals (DSH).  These facilities and hospitals receive government subsidies to treat large numbers of low-income people on Medicare and Medicaid, as well as indigent, uninsured patients.

Unfortunately, like many other well-intended programs 340B has ended up both wasting money and failing to provide the benefits that were supposed to go to the patients.  The healthcare data analytics firm IQVIA released its latest annual study, “The 340B Drug Discount Program Exceeds $100B in 2022,” 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 program historically was intended to help low income and vulnerable patients get access to low-cost prescription drugs; however, the program has grown and continues to expand beyond its intended purpose to boost profits for hospitals and their contract pharmacies that are largely located in areas that don’t serve low-income patients.

Citizens Against Government Waste (CAGW) first expressed its concerns over the 340B program in 2014, and has since published blog posts, op-eds, and other commentary about the shortcomings of the program.  In 2018, the House Energy and Commerce Committee released recommendations for 340B reform, and the September 27, 2022 article in The New York Times about the abuses of the program at the Bon Secours-owned Richmond (Virginia) Community Hospital clearly demonstrated the need for changes to the program.  But nothing has been done, and as the IQVIA study shows, the problems are only getting worse.

Beyond the impact of the 340B program on pharmaceutical sales, biopharmaceutical drug companies are facing further market challenges due to government price controls.  The IQVIA study noted that the Inflation Reduction Act (IRA) price controls will impose additional pressure on future research and development.  CAGW submitted comments in response to the Center for Medicare and Medicaid Services, “initial guidance for implementation of the Negotiation Program for initial price applicability year 2026.”  The price controls implemented from the IRA will further distort the medical marketplace.  Additionally, the IRA expands the 340B drug discount program despite its flaws.

Congress has long distorted the medical marketplace by artificially imposing price controls and burdensome mandates.  It is time Congress restores the 340B program back to its original intent.   340B reforms must include a clear definition of a patient as an uninsured, low-income individual that does not qualify for Medicare or Medicaid.  Adopting that definition would go a long way to ensure that the program operates closer to the way it was originally intended.