(Jack Kalavritinos) – Well-intentioned programs often get turned on their heads inside the Capital Beltway.
The 340B drug pricing program, designed to lower the cost of certain medications for hospitals and clinics, is a prime example.
While the program operates under the assumption that the savings will benefit uninsured and low-income patients, eligible hospitals and clinics are allowed to charge whatever price they want for the medicines.
Even worse, those savings often fail to get passed along to patients.
The medicine markups at 340B hospitals are nearly seven times higher than at independent clinics, so it’s apparent they are benefitting at the expense of patients.
Thankfully, this issue is getting the attention it deserves.
Recently, Sen. Bill Cassidy, R-La., the chair of the Senate Health, Education, Labor and Pensions Committee, released the latest and most authoritative study to date on the 340B problem.
The report, “Congress Must Act to Bring Needed Reforms to the 340B Drug Pricing Program,” examined nine entities: two hospital systems, two contract pharmacies, two community health centers and three drug manufacturers.
Cassidy concluded that his study reveals “transparency and oversight concerns that prevent 340B discounts from translating to better access or lower costs for patients.”
He concluded that “Congress needs to act to bring much-needed reform to the 340B Program.”
Cassidy’s report shows that the 340B program, as currently run, creates an incentive to sell more medicines and more costly medicines for reasons that have nothing to do with the welfare of patients in need.
Furthermore, premiums for employees and workers increase, and the costs of Medicaid and Medicare rise, diverting funds from other critical government programs.
Today, profits from 340B markups make up 10 percent of every dollar spent on brand-name medicines.
This is staggering and amounts to a multi-billion-dollar windfall for hospitals, clinics and for-profit companies.
One of the hospitals in the study, Bon Secours Mercy Health, used 340B to generate $276 million between 2018 and 2023. Another hospital system, Cleveland Clinic, received $993.7 million from the program.
Both institutions maintain the increased revenue has gone toward “capital improvement projects” and “community benefit programs” but have declined to provide specifics about how the money is allocated.
In addition, both hospital systems incorrectly argue that the 340B program was not intended by Congress to provide direct savings for patients.
Biopharmaceutical innovators have long been sounding an alarm over this.
Under the 340B program, they are required to provide billions of dollars in discounts to eligible entities. Yet, the program has little oversight, and the money is failing to reach its intended recipients.
Calls for guardrails — common-sense measures that exist in similar government programs — have fallen on deaf ears.
Over the years, the Department of Health and Human Services has failed to respond to manufacturers’ concerns.
340B hospitals continue to resist transparency when, at the very least, they should provide an annual accounting of where their 340B revenue is being spent.
Transparency. Accountability. Common-sense data reporting.
Proof that there is a direct link between program savings and patient benefits.
And on the government’s end, clear guidelines to ensure that manufacturer discounts benefit 340B-eligible patients.
These are the missing links.
The Cassidy report makes the strongest case for oversight and reform of the 340B program.
There is no question that legislators must reform it to eliminate waste, fraud and abuse and restore it to its original purpose.
After more than three decades of ineffective oversight by HHS and Congress, it is time to address the unintended consequences of the 340B program, offer real support to low-income and vulnerable patients, and allow the program to work as intended.
The Cassidy report will serve as a catalyst for long-needed legislation and oversight to correct these problems.
Jack Kalavritinos, is the founder of JK Strategies and a former senior OMB, HHS and FDA official in the Bush and Trump Administrations. He wrote this for InsideSources.com, published on 5/28/25.
