340B Program Reform: Employer Concerns
- Employer groups are calling for reforms to the 340B drug discount program, alleging that some hospitals exploit the system to boost profits rather than help low-income patients.
- Organizations like the National Alliance of Healthcare Purchaser Coalitions argue that some hospitals "buy low and sell high," purchasing drugs at significant discounts and charging insured patients full...
- According to Gremminger, the 340B program negatively impacts employers in several ways.
Employers are actively seeking reforms to the 340B drug discount program, citing concerns that some hospitals are exploiting the system.These groups, including the National Alliance of Healthcare Purchaser Coalitions, argue the program is being abused to boost profits rather of helping low-income patients, leading to an estimated $6.6 billion in lost rebates annually. The primary_keyword, 340B program, allows eligible hospitals to purchase outpatient drugs at discounted prices. Though, critics also claim the program fuels hospital consolidation and distorts prescription patterns. These criticisms, and the secondary_keyword, employer concerns, are prompting calls for greater clarity. According to News Directory 3, several healthcare industry leaders are demanding changes to the 340B.Discover what’s next as stakeholders debate the future of this critical program.
Employers Seek Changes to 340B Drug Discount Program
Employer groups are calling for reforms to the 340B drug discount program, alleging that some hospitals exploit the system to boost profits rather than help low-income patients. the program, designed to help hospitals care for vulnerable populations, allows eligible hospitals to buy outpatient drugs at discounted prices.
Organizations like the National Alliance of Healthcare Purchaser Coalitions argue that some hospitals “buy low and sell high,” purchasing drugs at significant discounts and charging insured patients full price.Shawn Gremminger,president and CEO of the coalition,said that while the original intent of the 340B program is laudable,its abuse by large,profitable institutions needs to be addressed.
According to Gremminger, the 340B program negatively impacts employers in several ways. When drugs are obtained through the 340B channel instead of an employer’s pharmacy benefit manager (PBM), the employer loses out on rebates. Data from the Alliance indicates that employers lose about $6.6 billion annually due to lost rebates.
Bret Jackson, president and CEO of the Economic Alliance for Michigan, echoed Gremminger’s concerns. He said that while the program initially worked as intended, corporate healthcare has learned to maximize its benefits, leading to large profits for hospitals at the expense of employers.
The employer groups also contend that the 340B program encourages hospital consolidation, as private practices cannot participate. Gremminger noted that hospitals have a strong incentive to acquire oncology practices because of the drug price discounts.
Data from Avalere Health shows that over 70% of hospital acquisitions from 2016 to 2024 involved buyers covered by 340B. gremminger also pointed to “distorted prescribing patterns” within the program, where hospitals are incentivized to prescribe more expensive drugs due to the larger discounts.
A Health Affairs report found that 340B hospitals prescribe biosimilars, which are cheaper alternatives to biologics, 23 percentage points less often than non-340B hospitals.
Hospitals, however, defend the 340B program. The American Hospital Association (AHA) calls it a “lifeline” that allows them to expand access to care. Bharath Krishnamurthy, director of policy at the AHA, attributed the program’s growth to rising drug prices and Congressional actions.
Cleveland Clinic told MedCity News that the 340B program helps the association save resources, allowing them to provide care to patients who cannot afford it and invest in local communities. Maureen Testoni, president and CEO of 340B Health, argued that employers would be paying the same amount without the program.
Gremminger countered that employers would be paying the negotiated prices they get through thier PBMs if 340B did not exist. A report from the National Alliance of Healthcare purchaser Coalitions found that commercial prices are about 7% higher at large 340B hospitals compared to large non-340B hospitals.
The Alliance is calling for greater transparency in the 340B program, including details on how much employers are losing and where the money is going. Gremminger suggested limiting the program’s scope to safety-net providers,community health centers,and rural hospitals.
jackson said the program should revert to its original intent, with revenue used for patient care and addressing labor shortages rather than expanding service lines.