Peter Mihalick, Vice President of Public Policy at the American Medical Informatics Association, raised concerns that the 340B Drug Pricing Program creates incentives for nonprofit hospitals to prioritize profits rather than delivering savings to low-income patients, amid similar scrutiny building in New Jersey.
The 340B program was designed to help uninsured and low-income patients by requiring pharmaceutical manufacturers participating in Medicaid to provide eligible safety-net hospitals and clinics with certain outpatient drugs at significantly reduced prices. Covered entities are expected to use the savings to expand access and services for these populations, according to the Health Resources and Services Administration.
“Instead of helping, the 340B program provides misguided incentives for nonprofit hospitals. According to congressional testimony, markups at 340B hospitals can soar as high as 700 percent,” said Mihalick. “Meanwhile, 340B’s benefits are rarely passed on to patients in large nonprofit hospitals. Despite their supposed focus on the needy (thus the term ‘nonprofit’), a mere 2.5 percent of their care is provided as charity, compared to 3.8 percent at for-profit facilities. The program ends up shortchanging rural and inner-city patients to increase profits at these hospital systems,” according to his op-ed in the DC Journal.
Only 1.4% of 340B prescriptions at contract pharmacies provided any direct savings to patients, with most revenue from discounts retained by hospitals and intermediaries, leaving minimal benefit for intended recipients, according to Policy Research from Johnson & Johnson.
In New Jersey, 340B hospitals increased assets by 45% from 2014 to 2022 while uncompensated care fell 32%, according to PhRMA’s New Jersey state profile. The same analysis reported that employers in the state pay an estimated $62 million more each year in health care costs because of foregone rebates tied to 340B prescriptions, intensifying criticism of the program’s downstream effects.
According to the Alliance for Integrity and Reform of 340B, disproportionate share hospitals in the program earned $44.1 billion in 2022 but spent only $18.5 billion on charity care. About 85% of these hospitals made more from 340B discounts than they spent on charity care, with much of the surplus going toward payroll and operations rather than direct patient assistance.
Mihalick is a former legislative director and counsel to two Republican members of Congress with over fifteen years’ experience in legislative relations and government affairs; he previously worked as senior director of government affairs for the Organic Trade Association and holds a Juris Doctor from Hofstra University.
