Which 340B Entities Are Getting Most of the Savings?

When policymakers think about the 340B program, they often think of the thousands of clinics that depend on the 340B program to help underserved populations. The 340B program requires pharmaceutical manufacturers to provide these clinics and other qualifying entities with medicines at steep discounts.

While grantees are often seen as the face of the 340B program, data shows grantees actually account for just a small share of the overall volume of drug sales in the 340B program. Instead, the program is largely benefiting hospitals that qualify for the program on the basis of their disproportionate share hospital (DSH) percentage, a measure relating to the number of Medicaid and low-income Medicare patients treated on an inpatient basis. These hospitals represent just 9 percent of 340B entities but are responsible for 81 percent of 340B sales volume.

The fact that DSH hospitals are the driving force behind the 340B program raises important questions about whether the program is serving its original goal of improving access to medicines for vulnerable or uninsured patients. Federally qualified health centers, Ryan White Program grantees, hemophilia treatment centers, family planning clinics and other grantees participating in 340B typically serve a vulnerable population, identified by an income-based, sliding-fee scale, and must reinvest resources into services for those populations. Hospitals, however, do not have this requirement. In many cases, hospitals qualifying for 340B provide minimal charity care.[1] And further, recent evidence suggests that hospitals are more likely to not pass along 340B discounts to patients compared to grantees.[2] 

About a third of all hospitals now qualify for the 340B program and more hospitals are likely to become eligible for the program due to changes in the health care system. Increases in Medicaid enrollment due to the Affordable Care Act will make more hospitals eligible for 340B through their DSH percentage. At the same time, hospitals are buying up physician practices to enable formerly independent physician practices to gain access to 340B discounts in the community setting.  All the while, it is unclear if patients are seeing any benefits from hospital participation in this safety net program.

The lack of requirements on hospitals to use 340B discounts to improve access to medicines, combined with data showing that hospitals are the primary beneficiaries of the program, raises questions about whether the program is really serving the patients it was intended to benefit. Congress should revisit the rules governing the program to ensure that only true safety net hospitals qualify and that they use 340B discounts to improve access to medicines for vulnerable or uninsured patients.

View all 340B Spotlight Posts

[1] Alliance for Integrity and Reform of 340B, "Unfulfilled Expectations: An analysis of charity care provided by 340B hospitals," Spring 2014 (Available at: http://340breform.org/userfiles/Final%20AIR%20340B%20Charity%20Care%20Paper.pdf)

[2] Department of Health and Human Services Office of Inspector General, "Memorandum Report: Contract Pharmacy Arrangements in the 340B Program," February 2014 (Available at: https://oig.hhs.gov/oei/reports/oei-05-13-00431.pdf)