The rise in spending in the 340B Drug Pricing Program has long flown under the radar, despite the large and growing cost that 340B represents across the U.S. healthcare system.
A new analysis by the Congressional Budget Office (CBO), however, exposes why the growing costs of 340B are being borne by American taxpayers. The report shows not only that a segment of the program has surged from $6.6 billion in 2010 to $43.9 billion in discounted spending in 2021, most of it concentrated among disproportionate share (DSH) hospitals. Critically, CBO also documents how 340B has fueled increased costs for all Americans.
Outside of shifts in utilization, CBO finds that the biggest driver of 340B growth was hospital entities’ “integration of hospitals and off-site clinics from 2010 to 2021.” The vertical integration described by CBO undermines independent practices operating without the ability to leverage 340B discounts available to large hospital systems.
Several academic studies have concluded that the 340B Program is not linked to patient- or population-level benefits in the communities it was intended to support. A recent study from Johnson & Johnson, conducted in collaboration with Dr. Neal Masia of Columbia University and Prof. Darren Filson of Claremont McKenna College, documented how 340B hospitals turn off-site clinics, known as child sites, into 340B profit drivers: They systematically prioritize growth in healthy and wealthy neighborhoods with rich reimbursement prospects over areas in greater need. As of 2022, child sites were placed in healthier, wealthier and better-insured areas, compared to the parent 340B hospital or alternative areas 340B hospitals could have targeted.
The J&J research echoes concerns of other experts that when 340B hospitals expand, they do so in ways that provide little assistance for low-income Americans. The surge in contract pharmacy arrangements, for instance, was also listed by the CBO as a factor in 340B Program growth. But, like the child site data, evidence shows that the share of contract pharmacies declined in areas with vulnerable communities.
While CBO looked at impacts through 2021, issues with the program have only escalated as J&J explains in its latest Issue Brief, The 340B Program: Missing the mark for patients. By 2023, 340B reached $66 billion at 340B acquisition prices, a 50% spike in just three years. According to IQVIA, 340B spending at list price level amounted to over $147B in 2024.
The CBO study highlights the link between 340B growth and healthcare consolidation, which has been found to raise healthcare prices. The report suggests that 340B incentivizes the use of higher-cost drugs. All these factors add to the cost of insurance, as CBO explains. Further adding to the unintended consequences, employers whose employees receive medications through 340B-covered entities may forgo manufacturer rebates that could be used to lower employer healthcare costs.
The Bottom Line: 340B carries a significant cost for government, taxpayers, employers, and patients. The unmistakable takeaway from CBO’s careful analysis? All Americans pay a steep price for 340B’s uncontrolled growth. J&J supports reforms that are patient-centered and include increased transparency, accountability, and oversight so that large health systems are unable to divert discounts intended to benefit low-income and vulnerable patients.