If You Care About Health Equity, You Should Care About Preserving 340B
For those outside the healthcare space, the Federal 340B Drug Pricing Program is a little-known and less-understood government program. For hospitals and health systems (covered entities) working to close gaps in access to needed medications and services in their communities, it is a lifeline.
As pharmacy leaders and health care administrators know, at its core, 340B is meant to make outpatient prescription medicines more affordable for rural, community, and “safety net” hospitals that provide care to low-income or uninsured populations.
The program requires pharmaceutical manufacturers whose drugs are covered by Medicaid to offer steep drug discounts of an average 25%-50%. Hospitals and health systems then use the savings to offer free care for uninsured patients including vaccines, mental health services, medication management, and community health services. More than one-third of the nation’s hospitals are eligible for 340B1,2.
Not surprisingly, many drug makers either oppose or are reluctant to participate fully in the program, lamenting dramatic increases in drug discounts year over year. In reality, those discounts are a direct consequence of price hikes set by the drugmakers themselves.
Bi-partisan Support
There are some encouraging early signs from the new administration about the future of 340B.
A spate of recent lawsuits by drug manufacturers Eli Lilly, Bristol Myers Squibb, and Novartis sought to uphold a revised payment structure initiated last year by Johnson & Johnson, and subsequently rebuked by the Department of Health and Human Services (HHS), that would have transitioned 340B benefits redemption for certain popular drugs to rebate payouts. As we’ll outline later, that would have been a significant setback for hospitals that rely on those discounts.
However, in March HHS filed a motion in 340B’s favor, seeking to maintain the integrity of the program and prevent tactics by Big Pharma to create administrative burdens that delay payments of federally-mandated benefits.
Still, ongoing legislative and legal debates remain a threat to the program’s stability, and it’s important to stay vigilant to protect this critical yet tenuous safeguard for our most vulnerable citizens.
The Benefits of 340B
Since its creation in 1992, 340B has grown to be the second-largest federal drug program in the U.S. – behind only Medicare Part D – and is on course to overtake it. In 2023 alone, 340B covered entities purchased $66.3 billion in discounted outpatient drugs under the program. Those savings deliver equally large benefits:
- For low-income patients: ability to access and adhere to needed medications
- For communities: access to free or reduced-cost care, such as diabetes management and broader services, programs, and support to address social determinants of health
- For hospitals and other covered entities: financial stability during volatile times (about three out of four responding to a 2022 340B health survey reported using their 340B savings just to keep their doors open)
- For ordinary taxpayers: benefits of the program, directly or indirectly, at no cost to them
- For our nation: to advance health equity in historically under-resourced communities and promote health and wellness for millions of Americans
Considerations for Maximizing 340B Benefits
Maximizing benefits from this thirty-year program can be challenging for hospitals and health systems.
- In a July 2024 RxBenefits survey of participating hospitals, 41% cited “maintaining program compliance” as their top 340B challenge. Participating in 340B is very complex from an administrative and compliance standpoint. Most covered entities need – and leverage – external support, including third-party administration, auditing, and education.
- One area of often untapped opportunity by covered entities is ensuring 340B-eligible employees and families fill prescriptions at locations that will provide the discount. Hospitals across the country today employ more than 7.4 million workers. RxBenefits estimates 40% to 60% of those employees (and their dependents) are potentially eligible, yet only a portion use the discount program. The opportunity is particularly great in rural communities, where hospitals may be the dominant primary care providers.
- Another area of missed opportunity is the under-utilization of outpatient pharmacies. Hospitals may not be maximizing these onsite locations, when available, particularly for high-cost specialty drugs.
Working with a partner with broad expertise in 340B can help covered entities make the most out of this valuable, yet complex, program.
Attempts to Reduce or Dismantle 340B Benefits
Despite its many benefits, the program has opponents – namely, the pharmaceutical manufacturers who are required to fund it. Having, thus far, been unable to get Congress to put brakes on the program, some have resorted to unilateral measures.
- Converting to Rebates: Johnson & Johnson’s attempt last year to convert 340B pricing from an upfront discount to a rebate model on two of its top-selling prescription drugs, Stelara™ and Xarelto™, was unsuccessful. In fact, HHS said the move would violate 340B regulations and threatened to impose penalties if J&J moved forward. In a display of bi-partisan support, HHS recently picked up where the last administration left off, by throwing support behind 340B and dealing another blow to the drug makers who’d sued to support the pivot to rebates.
Under the 340B program, if covered entities know a prescription qualifies, they can purchase drugs at the 340B price upfront. Alternatively, they can seek replenishment through back-end rebates if they don’t determine eligibility before the prescription is filled. J&J’s decision would have eliminated the first option, requiring hospitals to buy the drugs at the full commercial price and submit detailed data – including extensive medical claims – to receive the discount through a rebate. If allowed to stand, such a move would have created a serious financial issue for hospitals that may not have the cash reserves to pay the full upfront cost and take a risk on whether they would eventually receive a rebate. It would also have transferred de facto authority for 340B qualification from the provider to the manufacturer. While J&J backed away from its decision, and HHS has shown support for the status quo, the final decision on a potential pivot to rebates remains with the courts.
- Curtailing Contract Pharmacies: In 2020, Eli Lilly became the first drugmaker to say it would only honor 340B discount claims from one contract pharmacy per covered entity. More than 30 manufacturers followed Lilly’s lead and have imposed similar restrictions3. Such actions make it much more difficult for low-income patients living in “pharmacy deserts” to fill their 340B-eligible prescriptions and raise questions about pharmaceutical manufacturers’ commitment to greater access and health equity.
Advocating for 340B
Sadly, 340B’s continued existence in its current form cannot be taken for granted. In our survey, 30% of respondents called out “changes to federal laws and regulations” as a 340B challenge. The 340B program provides a valuable service without which many under-resourced communities and populations would suffer. It may only account for 3% of drug companies’ total revenue, but it offers big benefits at zero taxpayer cost.
Today, more than ever, a critical element of a successful 340B program is advocacy. Covered entities should work with state and federal groups to ensure their voices are heard. Community Voices for 340B is a prime example of an effective advocacy group, and we proudly partner with them in advocating for this critical program. This podcast series with the American Society for Healthcare Human Resources Administration (ASHHRA) provides additional guidance pharmacy leaders and health systems can use to optimize their 340B savings. This is a complex program that can be difficult to navigate without deep experience and expertise. There are dedicated resources who focus full-time on optimizing 340B programs for hospitals and covered entities.
The Federal 340B Drug Pricing Program may not be widely-known or well-understood by those outside the healthcare space. But for the rural and community hospitals and patients who rely on its benefits, it’s a necessity. For thirty years the program has helped remove barriers for our nation’s most vulnerable citizens, expanding access and bringing us closer to health equity. We must double down, not dial back, on our commitment to protecting this vital program.
1 Statista. (n.d.). Total number of hospitals in the U.S. from 1975 to 2023. Statista. Retrieved from https://www.statista.com/statistics/185911/number-of-hospitals-in-the-us-since-2005/
2 U.S. Government Accountability Office. (2022, May 17). 340B Drug Discount Program: Information about hospitals that received an eligibility exception as a result of COVID-19 (GAO-22-104340). https://www.gao.gov/products/gao-22-104340
3 CommunityRx. (2024). CRx restrictions 2024-12 updated [PDF]. Retrieved from https://communityrx.org/resources/crx-restrictions-2024-12-updated.pdf
