The 340B Drug Pricing Program is a federal initiative designed to assist sure healthcare suppliers, often known as “coated entities,” stretch their assets to higher serve weak and underserved affected person populations. Created in 1992, this system requires pharmaceutical producers to promote outpatient medicine at considerably discounted costs (usually 25% to 50% off) to eligible hospitals, clinics, and well being facilities that look after numerous uninsured and low-income sufferers. These coated entities can then use the financial savings from these discounted drug purchases to offer extra complete companies, attain extra eligible sufferers, and supply extra applications that improve affected person care and entry of their communities. Proponents of the 340B program declare that it improves entry to look after underserved populations with out utilizing taxpayer cash (since all funding comes from obligatory reductions from drug producers).

Whereas the 340B program was focused to coated entities treating underserved populations, lately the dimensions of this system has grown. In keeping with a report by Masia (2024), the variety of hospitals taking part in 340B has elevated by 31% within the final decade. Whereas this will likely appear to be a big quantity, every grantee now could be extra more likely to increase their attain by working quite a lot of sub-sites or sub-grantees. Utilizing this definition, hospital websites elevated by 126% (grantee website elevated by 61%) during the last decade. There at the moment are almost 200,000 340B contract pharmacies within the US.

Masia then examines the affect of 340B on Medicaid value:

Our regression estimates recommend that the rise in 340B hospital and grantee participation from 2014 to 2021 elevated total Medicaid spending by $391 per enrollee, or over $32 billion per yr. This implies that 340B-driven spending could account for roughly 10% of total Medicaid spending, considerably growing the price of this system to taxpayers.

Why would 340B enhance value? The writer posits that 340B-driven market consolidation, website of care alternative, alternative of remedy may all be impacting the outcomes. For example, 340B hospitals could desire to prescribe branded as in comparison with generic drugs underneath 340B for the reason that revenue they make off branded medicine is far bigger. Whereas 340B coated entities get reductions for these medicine, payers reimburse the coated entities at full value.

You may learn Neal Masia’s full paper right here.