Wasteful Spending on 340B Keeps Growing and Growing | Citizens Against Government Waste

Wasteful Spending on 340B Keeps Growing and Growing

The WasteWatcher

One of the many programs whose problems seem to have gotten lost during the response to the COVID-19 pandemic is the 340B drug safety-net program.  Citizens Against Government Waste (CAGW) has expressed concerns about 340B since 2014, including a June 18, 2018 letter signed by 58 organizations to Health and Human Services Secretary Alex Azar, calling for reforming the program. 

Originally created to help uninsured, indigent patients get access to prescription drugs, the program is now used by hospitals and for-profit pharmacies as a virtual ATM to generate millions of dollars in profit, forcing consumers and taxpayers to pay for the safety-net program’s exploitation.  Because there is no clear definition for a 340B patient, hospitals and their contract pharmacies that participate in the program can utilize the discount program on patients with insurance, keeping the spread between the deeply discounted 340B price and insurance reimbursement. 

Some of the reforms CAGW has called for include legislation to clarify that 340B patients must have a low income and are not insured to make sure the program is protected for them and the savings are not used to fatten hospital and pharmacy coffers.  Because it is a price control program, its exponential growth helps to distort the entire pharmaceutical marketplace, driving up costs for everyone.

A June 9, 2020 Drug Channels article reported that based on information provided by the Health Resources and Service Administration, which runs 340B, the program reached $29.9 billion in sales for 2019, a 23 percent increase over 2018.  That equals a 232 percent increase over the $9 billion cost of the program in 2014.   The 340B program alone accounts for 8 percent of the total U.S. drug market and cost almost as much as outpatient drug sales under Medicaid.  The article pointed out that 340B does not have Medicaid’s regulatory infrastructure, so “Medicaid rebates directly and transparently lower drug costs for the government, while 340B discounts disappear into providers’ financial statements.”

The Berkley Research Group (BRG) found that the 340B program increase by 170 percent since 2015 in its June 2020 report, “Measuring the Relative Size of the 340B Program.”  According to BRG, in 2018, healthcare providers purchased one in every seven units of branded drugs through the program and the only federal prescription drug program larger than 340B is Medicare Part D.

The report’s conclusion was the program has grown significantly since 2010, particularly in recent years.  In 2018, purchases through the program represented “14 percent of the overall branded drug market” and that number is likely to grow unless there are regulatory of legislative changes made to the program.

The 340B program started out with good intentions but is now being used by hospitals, for-profit pharmacies, and consultants to pocket billions of dollars.  It is clear if the program is not reformed in order to serve the population it was originally attended to help, it will collapse on its own weight.  As busy as Congress has been spending money, reforming 340B is a chance to save some money.


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