The 340B Drug Pricing Program was originally designed to help safety-net providers, such as eligible non-profit hospitals, provide access to more affordable medicines for low-income and vulnerable patients. Under the program, certain providers – known as covered entities – can purchase outpatient drugs at steep discounts. Covered entities may pass 340B discounts directly to patients, but they are not required to do so. Hospital covered entities can also register outpatient clinics, known as “child sites,” to extend their reach into neighborhoods beyond the hospital campus. The number of 340B hospital child sites exceeded 34,000 in 2023, compared to just over 7,000 ten years earlier.
What are the characteristics of the neighborhoods where 340B hospitals open child sites?
A recent study conducted by researchers at Columbia University, Johnson & Johnson and Claremont McKenna College investigated where 340B hospitals chose to locate their child sites. What do we know about the neighborhoods that 340B hospitals target for opening child sites? The team analyzed 12,632 covered entity/child site pairs where the child site was in a different neighborhood from the main campus, comparing socioeconomic and health differences as of 2022. The results were striking: The data suggest that 340B hospitals do not generally increase care by placing their child sites closer to vulnerable patients in lower-income, higher-need neighborhoods. The study documented that the average 340B child site was located in an area with significantly higher incomes, lower unemployment rates, lower uninsured rates, lower share of non-white residents and overall healthier populations than its parent covered entity.
The study approach stood out because it examined not only the areas where the parent hospital decided to open child sites, but also other nearby neighborhoods where the parent hospital could have located a child site. By examining reasonable alternative locations within a 10-mile radius, the study investigated how a parent covered entity can target the 340B profit-seeking incentives behind child site expansion. The authors found that, across thousands of relationships nationwide analyzed for the study, the average 340B child site is in an area with more affluent patients than both the parent hospital or alternative neighborhoods the hospital could have expanded into. Rates of adult diabetes, stroke, obesity and smoking were all higher in the neighborhoods that the average 340B hospital chose not to expand into, while more people in these neighborhoods lacked insurance.
Regardless of what motivates hospitals, having child sites placed in neighborhoods already well-served by the health system risks exacerbating health disparities between communities and may work against the 340B program’s goal of ensuring more affordable access to medicines in areas with greater need. The study concluded that, instead of directly serving neighborhoods with greater needs, child site expansion generates additional profits for 340B hospitals; this tends to target healthier and wealthier neighborhoods with higher private insurance reimbursement prospects. The lack of accountability and tracking of 340B profits leaves researchers unable to confirm whether hospitals are using 340B gains in line with the program’s intent. There are no federal 340B requirements or reporting mandates for hospitals, nor is there any voluntary systematic tracking, to document measurable patient benefits. This has fueled questions among legislators across the U.S. about whether financial gains from the 340B program are being effectively utilized to deliver the expected benefits to patients who need them. Evidence should lead policymakers to reform 340B, and this peer-reviewed study offers important insights into misalignment of priorities in child site expansion. This study echoes long-standing concerns that the program has been converted from one designed to help vulnerable patients into one that enriches hospitals’ bottom lines.
Ensuring the program serves its intended purpose will require careful policy considerations, as well as a commitment to increased transparency and accountability around how hospitals allocate their 340B profits. Policymakers should implement reporting requirements regarding how 340B profits are utilized, tie child site eligibility to demonstrated vulnerable population need, and establish accountability measures to ensure hospitals reinvest 340B profits in line with the program’s intent.
This research was funded by Johnson & Johnson and conducted in collaboration with Dr. Neal Masia (Columbia University/ Entity Risk) and Darren Filson (Claremont McKenna College). For full details on the study design, methods and limitations, see: Masia N, et al. Income, health, and racial gaps between 340B hospitals, child sites, and nearby neighborhoods. Health Affairs Scholar. 2025;qxaf121. doi:10.1093/haschl/qxaf121.