Some Hospitals May Not Be Using Funds from Prescription Drug Discount Program as Intended  

By Consumers for Quality Care, on December 20, 2023

Revenue from a prescription drug discount program designed to assist low-income consumers is instead being used by some hospitals to turn massive profits, according to a study conducted by the JAMA Health Forum and reported by Healthcare Dive.  

The 340B Drug Pricing Program was first introduced in 1992 to ensure that low-income consumers could still receive critical prescription drugs. Under the law, drugmakers must sell drugs to certain providers at a discounted rate, sometimes up to 50 percent off the market price. With the revenue generated from these savings, hospitals are supposed to assist those who cannot afford the medications they need. But there are growing concerns that hospitals are using this revenue for purposes other than assisting low-income consumers.  

The recent JAMA Health Forum review suggests that while some hospitals use the funds to increase services and treatments for low-income consumers, others may end up using 340B funds for purposes “seemingly unrelated” to patient care, according to the researchers. For example, it was observed that some hospitals used these funds to acquire new practices and facilities in more affluent, and therefore, more profitable communities. 

These studies are also shining a light on the lack of reporting required from 340B revenue. Since hospitals are not required to report how revenue from the 340B program is used, there is little transparency into what providers are doing with these funds. Furthermore, there is concern that some covered entities may even be violating the rules of the program, for example, by reselling the discounted drugs at full price for a profit. 

Some proposals to rein in some of the potential abuses of the program include strengthening the reporting requirements for how 340B revenue is used, as well as increasing enforcement of penalties for covered entities that misuse the funds.  

Researchers from the JAMA review concluded, “Increased transparency regarding the use of 340B program revenue and strengthened rulemaking and enforcement authority for [Health Resources & Services Administration] would support compliance and help ensure the 340B program achieves its intended purposes.” 

Hospitals should not be allowed to take advantage of government programs designed to benefit low-income consumers and their families. Hospitals must be held accountable when they fail to use these funds to assist low-income consumers. Lawmakers should scrutinize the 340B program to ensure the law is helping save consumers money rather than helping hospital systems boost their profits.