The 340B Drug Pricing Program is Overdue for Reform

Background:

• The 340B Drug Pricing Program was created in 1992 and requires manufacturers participating in Medicaid to sell drugs at a 20 to 50 percent discount to “covered entities,” including non-profit hospitals and federally funded health clinics.
• The legislation did not define a patient or require the savings to be passed on to them. 
• The failure to include those requirements has led to a broad interpretation of eligibility and allowed the program to be used to inflate the profits of hospitals and pharmacies rather than providing discounts to patients.  

The Problem:

• According to the Health Resources & Services Administration, in 2005, 340B covered entities purchased $2.4 billion in drugs, and in 2023 purchases had increased by 2,500 percent to $66.3 billion, making it the second largest federal prescription drug program after Medicare.
• A June 5, 2015, Government Accountability Office report determined that in both 2008 and 2012, Medicare Part B drug spending was much higher at 340B disproportionate share hospitals than at non-340B hospitals, and in 2012, per beneficiary spending at the DSH hospitals was $144 compared to $60 at the non-340B hospitals.
• A May 2024 Health Capital Group report found that the increased participation in 340B between 2014 and 2021 raised Medicaid spending by $391 per enrollee, or more than $32 billion annually, accounting for approximately 10 percent of total Medicaid spending.
• A September 2022 Community Oncology Alliance report found that 340B acute disproportionate share hospitals prescribe more expensive medicines than non-340B hospitals, including charging more than five times the acquisition cost for oncology drugs.
• A March 2024 IQVIA report found that 340B increases costs by more than $5 billion annually for employer health plans regulated under ERISA.  
• The 340B program caused an estimated loss of $1.8 billion in federal and state tax revenue and increased costs by $7.8 billion for self-insured and fully insured employers and employees in 2021.
• Due to Congress’s inaction, state legislatures have passed legislation that creates a patchwork of laws regulating how 340B operates across the country. 

What Congress Can Do:

• Since 340B was created by a federal statute, permanent changes can only be made by Congress.
• An April 24, 2025, Senate Health, Education, Labor and Pension Committee Majority Staff report on the 340B drug pricing program includes a recommendation to clarify the definition of an eligible patient and ensure that the discounts benefit those patients.
• 340B reforms should include a clear definition of a 340B eligible patient, better verification of patient eligibility at the time the prescription is filled, a relationship between the patient and the covered entity, verification that services were provided within the past 12 months, and increased transparency.