Former FTC director on 340B program: ‘Drug discounts are being captured by corporate hospital systems'

David Balto, a former policy director at the Federal Trade Commission (FTC), has raised concerns about the 340B drug discount program, alleging that it is being manipulated by corporate hospital systems and large pharmacies to the detriment of patients and smaller providers. This assertion was made in an op-ed.

"But today, those drug discounts are being captured by corporate hospital systems and big box pharmacies, with no guarantee patients benefit at all," said Balto.

According to the Government Accountability Office (GAO), the 340B Drug Pricing Program was established in 1992 to enable certain healthcare providers to purchase outpatient drugs at discounted prices. The program's goal was to stretch scarce federal resources and expand services for vulnerable patients. However, scrutiny has arisen as hospitals and contract pharmacies have increasingly utilized 340B contracts. Critics argue that this expansion has diluted the program’s original intent.

A study published in 2024 in the Journal of Managed Care & Specialty Pharmacy found a dramatic increase in the number of 340B contract pharmacy arrangements, rising from 1,300 in 2010 to over 60,000 by 2022. The study expressed concerns regarding how financial benefits from these arrangements are distributed, noting a lack of evidence that patients directly benefit from the savings. Researchers called for greater transparency in the program’s financial flows.

In a separate analysis conducted by IQVIA in 2023, it was found that the 340B program accounted for 7.2% of the total U.S. drug market by volume. The study revealed that a significant portion of discounts obtained through the program were retained by hospitals and contract pharmacies rather than being passed on to patients. It also highlighted considerable variability in how different institutions applied these discounts.

Balto has extensive experience in antitrust law, having worked at both the FTC and the U.S. Department of Justice. He now leads his own law office where he advocates for consumer protection and competition within healthcare markets.