Skip to content

How hospitals hijacked a drug discount program for the poor 

By Howard Dean

Corporate greed is a powerful motivator. When our lawmakers draft legislation, they really ought to have a special committee to evaluate how corporations might exploit it.

No such committee exists, though. And that’s one reason a program enacted in 1992 to give poor and underserved populations better access to costly prescription drugs has turned into a multibillion-dollar boondoggle for hospital mega-chains.

It’s high time for Congress to restore the 340B drug discount program to its intended purpose.

The 340B program allows hospitals, specified clinics, and other “safety net” providers to purchase outpatient prescription drugs at significant discounts. Theoretically, providers could pass along these savings to their underserved patients by charging them less for medications — or reinvesting in services and facilities for those in need.

But nothing requires them to do that. So, very often, they don’t. Instead, they use the discounts to pad their profits.

Though 340B participants get drugs at a discount, they can still seek reimbursement from commercial insurers, Medicare, and uninsured patients at the much higher market rates. On average, for example, hospitals price top oncology drugs 4.9 times higher than their discounted acquisition cost.

The number of entities eligible to receive 340B discounts has skyrocketed since the program’s inception. Originally, only hospitals that served a “disproportionate share” of low-income Medicare or Medicaid patients, as well as certain specified clinics, were eligible to participate. This amounted to only a few thousand providers.

The program expanded over the years but really took off in the mid-2000s. Large hospital groups discovered they could claim 340B discount pricing even for clinics serving wealthier patients. By expanding the number of 340B entities, they could maximize profits without spending a dime on populations in need.

Today, more than 50,000 hospitals, affiliated clinics, and other providers claim 340B discounts.

As the number of participating organizations has risen, so too has the grift. Discounted purchases accounted for about $4 billion per year in 2009 but increased more than tenfold by 2022, to $54 billion.

All of this wouldn’t necessarily be cause for concern if participating providers passed along their savings to patients. But study after study has shown that large hospital systems and big pharmacies are the primary beneficiaries of 340B discounts. And these entities are pocketing the profits at the expense of low-income patients.

It’s time for Congress to act. The need for the 340B program — to help under-served populations receive quality care — remains just as pressing today as it was in 1992.

Reforming the 340B discount drug program should be a bipartisan priority. Let’s close the loopholes, increase the oversight, re-examinewhich hospitals should qualify, and ensure that hospitals re-invest their savings into helping those who need it most.

Howard Dean is the Former Chair of the Democratic National Committee and Former Governor of Vermont.

Leave a Comment