The 340B Drug Pricing Program and hospital consolidation are both under increasing scrutiny as policymakers examine how they are reshaping the healthcare landscape. A new study by Johnson & Johnson researchers and co-authors from Columbia University and Claremont McKenna College suggests they may be more interconnected than previously known.
Previous research has shown that hospital horizontal consolidation is associated with higher prices paid to providers and that health care spending is likely to increase in tandem with these price increases.
If 340B creates additional incentives to consolidate or if consolidation creates additional opportunities to profit from 340B, then it is likely that 340B is exacerbating the well-known impact of consolidation on hospital prices and consumer welfare. Policymakers should determine whether such effects are aligned with the 340B program’s original intent to help eligible safety-net healthcare providers provide access to more affordable medicines for low-income and vulnerable patients.
The new research shows that hospital consolidation is strongly associated with 340B participation and higher hospital profits.
The study, which was presented at the ISPOR 2025 conference, was based on data from over 2,200 nonprofit hospitals. It examined whether 340B participation is linked to hospital mergers, market share and profitability. The analysis found that nonprofit hospitals with greater local market share and those affiliated with larger health systems were significantly more likely to participate in the 340B program.
It also showed that 340B hospitals tend to have higher profit margins due to opportunities associated with the program, especially when they have recently merged or have higher outpatient revenue, both of which enhance 340B financial opportunities. For recently merged hospitals, 340B participation correlated with profit margins that were 5.2% to 7.0% higher than those of non-340B hospitals. The 340B impact was lower for hospitals who had not merged, but was still associated with 1.1% to 3.0% higher profit margins.
Based on the results in this study, this figure shows the potential impact 340B can have on the illustrative archetypes of hospitals (by revenue size), accounting for their merger activity. Our estimates imply that, for different archetypes, 340B participation is associated with higher profit margins, after accounting for other factors that impact hospital profits. See poster for research details.
The findings suggest that hospital scale and large health system affiliation, especially through consolidation, play a critical role in enabling access to, and maximizing financial gains from the 340B program. As a result, 340B may unintentionally reinforce the market dominance of larger health systems, further accelerating and incentivizing consolidation. Recent evidence by the Minnesota Department of Health echoes the relationships observed in this study, finding that 80% of the state’s 340B profits were captured by large 340B hospitals who accounted for only 13% of the state’s reporting entities. The 340B program exceeded $66 billion in discounted purchases in 2023 nationally, with an additional estimated $64 billion in 340B profits going to large health systems, contract pharmacies and pharmacy benefit managers (PBMs). As the financial windfalls of 340B continue to grow, concerns persist about whether 340B profits are being passed on to patients.
This study adds to a growing body of evidence raising questions about the true impact of 340B on vulnerable patient populations and the healthcare system more broadly - fueled by a lack of transparency in how the program operates. Data suggest that at least 56% of 340B profits “do not go to patients in any form,” while 340B hospitals provide comparatively low levels of charity care.
Johnson & Johnson is strongly committed to the original intent of the 340B Program to help safety-net providers serve vulnerable patients.
This research was funded by Johnson & Johnson and conducted in collaboration with Dr. Neal Masia of Health Capital Group, EntityRisk, and Columbia University, and Prof. Darren Filson of Claremont McKenna College. For full details on the study design, methodology, and limitations, see: Masia N, et al. “Does the 340B Program Encourage and Reward Non-Profit Hospital Consolidation?” Poster presented at ISPOR, Montreal, Quebec, Canada, May 13-16, 2025. https://www.ispor.org/docs/default-source/cti-meeting-21021-documents/d77c9631-596b-47d7-91b8-b2c76d73d2c3.pdf?sfvrsn=de1f7c5b_0