Wolfe: It’s Time to Restore Integrity to the 340B Program

The federal 340B Drug Pricing Program was created in 1992 to help low-income and uninsured patients access affordable prescription drugs by allowing safety-net hospitals and clinics to purchase medications at deep discounts. But over time, the program has drifted far from its original intent, becoming a profit engine for large hospital systems and some pharmacies rather than a safety net for vulnerable patients.

The Texas Conservative Coalition Research Institute (TCCRI) has long championed transparency, accountability, and responsible governance. Our latest white paper, 340B: From Safety Net to Moneymaker, exposes how the program has been exploited for profit, growing exponentially without oversight or safeguards. Today, many hospitals and some pharmacies they contract with are profiting while uninsured and low-income Texans struggle to afford their prescription drugs.

The 340B program is growing at an unsustainable rate. In 2010, 340B entities purchased $6.6 billion in discounted drugs through the 340B program. By 2023, that number had soared to $66.3 billion—a tenfold increase. The number of contract pharmacies has exploded from 1,300 in 2010 to more than 33,000 today—a 25-fold increase that is indicative of a program that has grown far beyond its original intent.

Instead of using 340B savings to help the underserved afford their medications, large hospital systems often mark up the price of 340B drugs, by as much as 25 times their purchase price. Some hospitals charge uninsured patients full price, despite obtaining the drugs at steep discounts. Making matters worse, there is no requirement that hospitals use 340B profits to directly assist low-income or uninsured patients.

Tom Wolfe

Insured patients are also affected. Medicare and commercially insured patients often pay co-insurance based on the hospital’s inflated price—not the discounted price—resulting in higher out-of-pocket expenses.

Data show hospital systems are increasing their 340B profits by acquiring outpatient clinics in high-income neighborhoods in specialties such as oncology to increase their profit margin on high-cost cancer treatments and medications, where they can find more patients who will pay marked up prices for drugs.  Hospitals’ charity care levels remain under scrutiny, while their 340B profits are hidden and potentially used for other purposes.

Despite these well-documented program integrity concerns as documented by numerous studies, including those by TCCRI and the federal Government Accountability Office, the Texas legislature may consider eliminating transparency and effective methods of ensuring the program is not abused at the state level—without addressing the program’s underlying problems. Expanding a program that lacks transparency and accountability will only magnify its flaws, increasing the cost of prescription drugs and health insurance for all Texans. 

The 340B program is a federal initiative requiring federal action. Congress is poised to take action later this year with legislation to restore alignment between the program’s mission and its use. 

Transparency is also essential. Hospitals must be required to disclose how they use 340B revenue, allowing policymakers to see whether the program is truly serving the patients it was meant to help. It’s simple— savings should be passed on to patients. No Texan should have to pay full price for a prescription drug that a hospital acquired at a steep discount  – especially Texans who have trouble affording their medications. Finally, Congress must curb the unchecked expansion of contract pharmacy arrangements, which has become a major driver of 340B’s misuse and growth.

The 340B program is broken, and, without reform, billions of dollars will continue to be diverted away from the patients it was designed to serve. Texans deserve a healthcare system that prioritizes patients over mark-ups, transparency over secrecy, and accountability over unchecked growth.

Until Congress enacts common-sense reforms to implement transparency, oversight, and accountability, expanding the program at the state level will only make matters worse. The time to fix 340B is now.

Editor’s Note: The above guest column was penned by Tom Wolfe, a policy director with the Texas Conservative Coalition Research Institute, a 501(c)(3) think tank in Austin. The column appears in the Rio Grande Guardian with the permission of the author. Wolfe can be reached by email via: info@txccri.org

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