Garden State Times

Concerns are mounting over the federal 340B drug pricing program, which was intended to provide affordable medications to low-income patients, as evidence suggests that some large health systems are using the program’s benefits to generate profits. The 340B program, established to supply safety-net hospitals with deeply discounted drugs, is now the second-largest federal prescription drug initiative, surpassing Medicare Parts B and D in scale.

According to an op-ed by Jeanette Hoffman, executive director of Patients Come First New Jersey, a lack of transparency allows hospitals to profit from discounts meant for underserved communities. By reselling discounted medications at higher prices, some hospitals reportedly fail to pass savings to low-income families and seniors. A New England Journal of Medicine study also found limited evidence that 340B revenue is used to expand care or lower costs for vulnerable patients.

“While well-intentioned, the biggest flaw in the 340B program is that the discounts don’t have to go to the beneficiaries for which they are intended,” Hoffman wrote in her op-ed. “As a result, some hospitals are reselling and marking up discounted drugs to patients and insurance companies.”

A New York Times investigation recently scrutinized a major nonprofit health system in Richmond, Virginia, alleging it reduced services at Richmond Community Hospital, a safety-net facility, while directing 340B profits to wealthier medical centers in affluent neighborhoods. Based on interviews with former executives, doctors, and nurses, the report claims the health system cut back on services at the safety-net hospital while investing in facilities in richer areas.

“[The hospital owner] was basically laundering money through this poor hospital to its wealthy outposts. It was all about profits,” said Dr. Lucas English, a former emergency department physician at Richmond Community, according to the op-ed.

Since 2010, the 340B program has expanded by 500%, now including over 25,000 contract pharmacies nationwide and more than 20 hospitals in New Jersey. Analysts link this growth to the lack of guidelines on how hospitals should use 340B discounts, prompting calls for reform to ensure funds benefit low-income patients directly.

In response to accountability concerns, some pharmaceutical companies have proposed replacing direct drug discounts with a rebate model, which proponents say would better ensure that savings reach intended beneficiaries. Transparency measures like these are gaining traction as policymakers and industry stakeholders explore potential program reforms.

Hoffman argues that government-imposed price controls, such as those in the Inflation Reduction Act, harm patients by stifling innovation in the drug market. She warns that price controls create economic uncertainty, reduce funding for research, and ultimately lead to fewer new medicines, especially in critical areas like cancer care. Hoffman emphasizes that the policies, while politically appealing, fail to consider the economic realities of supply and demand, leaving patients with fewer treatment options.

Nicole Longo, Deputy VP of Public Affairs at PhRMA, has also criticized hospitals for exploiting loopholes in the 340B drug pricing program, driving up costs by prescribing more expensive drugs and marking up prices, rather than passing savings to patients. She supported the 340B ACCESS Act, which aims to improve transparency and define eligibility for patients and hospitals. Longo also warned that the Inflation Reduction Act (IRA) could worsen the issue by limiting the ability to provide both 340B discounts and MFP rebates for the same drugs. She called on Congress to address abuses in the 340B program, which she says harm patients and taxpayers.

Dan Crippen, former director of the Congressional Budget Office, warned that the 340B drug program is contributing to the federal deficit, with its size and costs growing annually. He noted that in the previous year, the program reduced federal and state tax revenues by up to $17 billion, as hospitals and healthcare institutions continue to profit from discounted drugs instead of passing savings to patients. The program, designed to help low-income patients, has expanded rapidly but lacks oversight, allowing inappropriate transactions and reducing its intended benefits. Advocates for reform, like the Alliance for Integrity and Reform of 340B (AIR340B), are calling for increased transparency and clearer eligibility criteria to ensure the program supports its intended purpose.

Jeanette Hoffman is a public affairs consultant and media spokesperson, specializing in strategic messaging, marketing, crisis communications, and public affairs campaigns. As president of a public affairs firm, she has more than 20 years of experience advising corporate and non-profit clients on issues advocacy, political campaigns, policy, and state government. she is also a regular media commentator on national television and radio, offering insights on politics and public policy.