Kevin Roche, president of Roche Consulting, said on April 28 that the federal 340B drug pricing program has drifted from its original intent of supporting low-income patients and is now a significant revenue source for hospitals and other providers. Roche said reforms are needed because hospitals can purchase drugs at steep discounts, receive higher reimbursements from insurers, and retain the difference, while patients and payers face higher overall costs.
“The 340B drug program was created by Congress to provide cheaper drugs for use on poor patients. It has been completely perverted by hospitals and other providers to make billions of dollars in profits and raise costs for consumers," Roche said in comments published by Healthy Skeptic.
"Intense lobbying by the hospitals has prevented needed reforms, but the pressure is rising. The way the scam works is this; the hospitals use 340B pricing to buy drugs for every patient they can, most of whom are not the indigent patients the program was designed to help. Then they charge payers, including Medicare and Medicaid, far higher prices for the drug and the hospitals keep the profit,” he added.
The 340B Drug Pricing Program allows eligible covered entities to purchase outpatient drugs from manufacturers at discounted prices, while reimbursement rates from insurers are not capped under the program. This creates a spread between acquisition costs and payments received, making transparency around revenue, patient benefit, and use of funds central to ongoing policy debates, according to a report from the Minnesota Department of Health.
In Minnesota, covered entities generated at least $1.34 billion in net 340B revenue in calendar year 2024. That total is based on $3.04 billion in reimbursements, $1.53 billion in drug acquisition costs, and $164.8 million in operational expenses. The report notes that the figure may understate actual net revenue because some physician-administered drug reimbursements are not fully captured in reporting systems.
Program spending continues to expand nationally.
Covered entity purchases under 340B reached $66.3 billion in 2024, up from $54.4 billion in 2023, reflecting continued growth in the program’s financial scale. The expansion has increased pressure for clearer reporting on how savings and spread revenue are used, particularly given providers’ ability to retain the difference between discounted acquisition costs and reimbursement amounts, according to the Health Resources and Services Administration.
The program also increasingly relies on contract pharmacy arrangements. Large retail chains account for a substantial share of participation, with 71% of pharmacies in the top four chains serving as contract pharmacies in 2022. A study published in Health Affairs Scholar found that this expansion complicates oversight and makes it more difficult to determine whether discounts are reaching patients directly or being captured by hospitals, pharmacies, and intermediaries.
Alerts Sign-up