Background
Congress created the 340B Drug Pricing Program in 1992 under the Public Health Service Act to support safety-net hospitals and other providers that serve low-income, vulnerable patients. At no cost to taxpayers, the program allows these “covered entities” to purchase outpatient drugs at a discount from drug manufacturers to help stretch scarce resources to reach more eligible patients and provide more comprehensive services.
Only hospitals that treat a significant share of vulnerable patients can qualify for 340B. These safety-net hospitals utilize the savings under the 340B program to provide access to programs and services for their communities, including low-income, rural, and other underserved patients. Some examples include providing free or discounted prescriptions to uninsured or low-income patients, improving access to specialized care previously unavailable in underserved areas, establishing and improving neighborhood clinics, and creating multidisciplinary clinics to treat substance use and mental health disorders.
According to the Pew Charitable Trusts, 340B discounts are only 1.4% of gross U.S. drug sales and the impact of 340B on manufacturers’ revenue is under 2%. Yet, the discounts generated from the program allow safety-net hospitals to provide crucial services to their patients.
Restricting the scope of the program would not result in additional funds for the federal government and could potentially leave patients who rely on these essential programs without necessary services.
In December 2018, the D.C. District Court ruled in favor of the AAMC and other hospital associations in a lawsuit against the Department of Health and Human Services that challenged the significant Medicare reductions in payments to 340B hospitals for certain outpatient drugs in the FY 2018 outpatient final rule.
Recommendation
Congress and the administration should maintain and strengthen the 340B program to ensure that America’s safety-net hospitals, many of which are teaching hospitals, can continue to provide vital programs to low-income and vulnerable communities and their patients. Additionally, rising prescription drug prices should be addressed directly – not through cuts to the 340B program.