News & Insights

Abuse of the 340B program has caused manufacturers’ health care costs to rise, as they miss out on negotiated drug manufacturer rebates. Reforms are necessary, the NAM told Congress this week.

What’s going on: “The 340B program, intended to provide lower cost medicines and expand care for low-income and underserved patients, has rapidly and massively expanded beyond its intent,” NAM Vice President of Domestic Policy Jake Kuhns told House Subcommittee on Oversight Chair David Schweikert (R-AZ) and Ranking Member Terri Sewell (D-AL) on Tuesday ahead of a hearing on tax-exempt hospital spending.

• “Many covered entities, which include tax-exempt hospitals, have taken advantage of the program to increase their profits. This has added to health care costs for manufacturers.”
• The 340B program allows participating hospitals and clinics to charge patients’ insurance the full list price for pharmaceuticals that were purchased at a discount. Patients then become ineligible to receive negotiated drug rebates, as duplicate discounts are prohibited by law.
• Hospitals keep the spread, boosting their profits, as manufacturers and manufacturing workers pay more for health care.
• Dr. Ge Bai, professor of health, policy, and management at
  Johns Hopkins Bloomberg School of Public Health, noted the substantial profits for hospitals and lack of transparency in the 340B program in her opening statement at the hearing.

The costs: “The expansion of [the 340B] program was associated with approximately $23 billion in additional employer-based health care expenses in 2023, of which employees paid about $4.5 billion per year in added insurance premiums,” or approximately $137 in additional annual premium payments for a single person and $415 for family coverage, the NAM pointed out.

• Lost drug manufacturer rebates account for “a $5.2 billion increase in health care costs for self-insured employers and the 103.4 million workers they employ.”
• Christopher Whaley, associate director of the Center of Advancing Health Policy through Research at Brown University, raised this issue in his opening statement as well.

What should be done: The Health Resources and Services Administration recently announced a rebate model pilot program for drugs subject to both the Medicare Drug Price Negotiation Program and 340B.

• This is an important first step in increasing transparency and accountability in the 340B program, the NAM noted.
• The NAM “encourage[s] Congress to consider additional 340B reforms that would reduce health care costs for manufacturers and manufacturing workers,” Kuhns told the subcommittee.