Kasia Mulligan, a spokesperson for the Patients Come First advocacy group, said that the 340B drug discount program lacks transparency and has been exploited by hospitals, preventing savings from reaching low-income patients. She made this statement in the DC Journal.
At least 77 Pennsylvania hospitals participate in 340b, according to 340bHealth.
“The 340B drug pricing program was a genuine desire to make prescription medications more affordable for low-income Americans and to increase hospitals’ care for underserved populations,” said Mulligan in an op-ed in the DC Journal. “Like many well-intentioned government programs, bad actors have taken advantage of 340B and abused the system for their own gain. The 340B program’s fatal flaw is a lack of transparency. Americans are sick and tired of middlemen preventing patients from receiving necessary care.”
According to Mulligan, although the 340B program was designed to help underserved patients, it is now widely abused. She said hospitals are using savings for unrelated expenses like executive pay. Mulligan cited polling showing that 86 percent of Americans want lawmakers to close loopholes to ensure transparency. She also emphasized that a rebate model could be a practical first step to ensure savings are passed to patients.
Established in 1992 and administered by the Health Resources and Services Administration (HRSA) the program aims to provide financial relief to healthcare providers serving vulnerable populations, allowing them to stretch their scarce resources and reach more eligible patients.
Hospitals participating in the 340B program can use the savings to fund essential services and programs, such as free or low-cost medication assistance, expanded access to healthcare, and community outreach initiatives.
Participating hospitals, however, “often extend their 340B discounts to clinics in well-off communities, where they can charge privately insured patients more than those on Medicaid,” reported the Wall Street Journal.
“In some cases, the program appears to be bolstering profits in well-off areas more than it is underwriting services in less-privileged neighborhoods,” said the Journal article.
DiGiorgio told Empire State Today in March 2024 that he sees a “potential for abuse” in the program.
“The hospitals often buy these drugs at the 340b discount and then resell them to Medicare and private insurance through independent pharmacies,” DiGiorgio said. “They charge Medicare and private insurance much more than the discounted price, reaping huge revenues.”
DiGiorgio said the program “makes no provisions requiring that the discounts be passed on to patients,” and there are also “no provisions that those revenues go back to charitable care, either.”
“The hospital can use that money for whatever it wants,” he said. “This potential for 340b abuse has led hospitals to contract with pharmacies in wealthy areas and acquire independent clinics in these wealthy areas as well.”
An analysis published last year by Dan Crippen, the former director of the Congressional Budget Office, estimated the 340b program reduces state and local tax revenues by $3.5 billion annually, on top of reductions in federal tax revenue.
“Even at current levels, the 340b Program results in a large transfer of taxable income to non-profit entities,” Crippen wrote. “As a result, last year alone, federal and state tax revenues were reduced by as much as $17B.”
“The value of the 340b discounts is estimated to be $70 billion last year alone,” said Crippen. “When state and local taxes are included in the calculation, the average combined tax rate for pharmaceutical manufacturers is roughly 25 percent. The addition to the tax rate results in a possible reduction of state and local tax revenue by $3.5B per year.”
