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Sticker shock over the cost of drugs isn’t going away any time soon. Drug prices spiked 7 percent last year, the highest rate since 1992. Compare that with the modest increase of just 0.8 percent in hospital care costs.

So why is the pharmaceutical industry working to gut a federal program that helps make medicines and hospital services affordable to the most vulnerable among us?

The 340B drug discount program was enacted by a bipartisan Congress more than 20 years ago and signed into law by President George H.W. Bush. The program requires drug companies to provide discounts to hospitals and clinics that serve high numbers of the poor. It continues to be a lifeline for health care providers and their patients. Only public and nonprofit providers qualify to take part in it.


The 340B program helps save lives. Jack Custalow of Richmond, Va., received treatment for a defective heart valve that he never could have afforded otherwise. Tammy Willette of Greensburg, Ind., faced aggressive breast cancer with no insurance. Dorian-Gray Alexander couldn’t afford his HIV medications in New Orleans, but with help from the program he’s healthy and active today.

Here’s how it works for hospitals and health systems. The 340B program makes it possible for Boston Medical Center to increase the number of naloxone opioid overdose rescue kits it dispenses. It helps Virginia Commonwealth University Health System in Richmond, Va., operate primary care clinics and coordinate services for uninsured individuals. MetroHealth System in Cleveland uses savings from the program to provide free and low-cost oncology care, as well as reduced prices on insulin and rescue asthma inhalers.


The pharmaceutical industry is trying to shrink the program in Washington by limiting hospital and patient eligibility, even though 340B represents just 2 percent of the annual $457 billion US drug market.

Critics — consisting of the pharmaceutical industry and its surrogates — contend that the 340B program has gone astray. Private practice oncologists have been particularly vocal, but their position is driven more by fear for their own bottom lines than concern for our most vulnerable patients. These physicians regularly send poor, uninsured, and underinsured patients they serve to safety net hospitals for treatment because they know these facilities take in all individuals regardless of their ability to pay.

Currently, 27 million Americans are uninsured. Among those under 65 with private insurance, 40 percent are enrolled in high-deductible plans, an increase of 15 percent since 2010.

The result? Safety-net health care providers are seeing more patients who either lack insurance altogether or who cannot afford their deductibles and copays. 340B hospitals serve these patients regardless of their insurance status. But treating the poor and underinsured is staggeringly expensive. 340B facilities provide 60 percent of all uncompensated care — nearly $25 billion annually — despite the fact that they represent only about one-third of all hospitals.

Hospitals taking part in the 340B program care for nearly twice the number of low-income patients as other hospitals and more than two times the number of disabled, African American, Hispanic, and Native American patients. Add to this the fact that 340B hospitals are more likely to provide money-losing services such as labor and delivery, HIV/AIDS care, and trauma centers, and the picture becomes crystal clear.

One of the most puzzling aspects of the effort to derail the 340B program is this: it’s a good deal for taxpayers. First, it is funded by the drug industry, not public coffers. Second, hospitals use the program to provide free or low-cost drugs to patients as they are being discharged. Putting medications in the hands of patients before they leave the hospital is proven to reduce readmissions — and the additional taxpayer expense of return visits to the emergency room.

Not only is the drug industry and its army of lobbyists working the halls of Congress, they have been spending time at federal agency offices trying to convince regulators to gut the program. A final set of guidelines is expected soon from the Department of Health and Human Services governing the future of the 340B program. A proposed version of the rules included deeply problematic exclusions of discharge medications and other changes that, if enacted, could cause many hospitals and clinics to drop out of the program.

The 340B program generates approximately $4.5 billion in total savings each year for hospitals, community health centers, AIDS clinics, and other providers. Pharma wants that money back — even as it boosts profits by pushing drug prices to unconscionable heights.

That’s not good public health policy.

Ted Slafsky is president and CEO of 340B Health, an association of more than 1,200 safety net hospitals in the federal 340B program.

  • Nobody – least of all pharmaceutical companies – objects to the legitimate funding of the 340B program to ensure that uninsured and indigent patients are able to access needed treatments. What many object to is the exploitation of the program by hospitals to generate astronomically high profit margins with zero accountability or transparency for how that money is spent. While certain non-profit clinics who also receive 340B discounts are generally required by other federal rules to use the discounts as designed to directly benefit patients, hospitals face no such requirement. While Mr. Slafsky is quick to point out self-reported examples of how some 340B hospitals use program profits to benefit struggling patients, there is in fact no requirement that they do so or even disclose how the money is made or spent.

    In fact, there is ample evidence to suggest that the program has strayed far from its original purpose. A report released earlier this year examined charity care provided by 340B hospitals, finding that 64 percent of them provided less charity care than the national average for all hospitals – including for-profit hospitals. And despite these low levels of charity care and fewer numbers of uninsured patients due to the Affordable Care Act, the 340B program continues to grow unchecked. Purchases under the program were $12 billion in 2015, up from $9 billion in 2014 and more than 67% higher than the $7.2 billion purchased in 2013. There is no data disclosing whether hospitals charged patients for those drugs, or how much they pocketed in reimbursements after billing the full rate for insured patients.

    It is no surprise that hospitals are eager to avoid any sort of oversight or scrutiny of this program. The number of uninsured patients is declining, and yet the program continues to expand exponentially year after year. It is clear that steps must be taken to ensure the program is directly benefiting the uninsured and indigent patients it was created to help, rather than just padding the bottom line for hospitals.

    Jim Greenwood
    President and CEO
    Biotechnology Innovation Organization (BIO)

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