A federal prescription drug discount program meant to support underserved patients has been leveraged by large hospitals to drive up health care costs for employers and working families while failing to assist the patients it was intended to help. Policymakers should shine a light on these hidden costs and make targeted reforms to rein in runaway expansion — not incentivize exponential program growth. That’s why the American Benefits Council issued our report, Growth Unchecked.
Most New Yorkers have never heard of the 340B Drug Pricing Program. But anyone who receives health coverage through their employer or pays taxes that fund public-sector benefit plans has a stake in what Albany does next.
A provision in the state Senate’s one-house budget proposal would lock in a lack of transparency in the 340B program in New York, fueling its expansion and higher health care costs for employer-sponsored health plans.
Instead, the Legislature should enact reporting measures to reveal how hospitals use their 340B revenues — and how much they’re taking in. Bringing accountability and transparency to 340B will inform efforts in Congress — where responsibility for fixing the program ultimately lies — to modernize the system and ensure it functions as intended without making health care more expensive for working families.
The original intent of 340B to help true safety-net providers do more with less, allowing vulnerable and uninsured patients to access lower cost medications. It has instead become a major profit center for large hospitals. They increase revenues by buying prescription medications at steep discounts, then bill health plans full price and pocket the difference.
Hospital drug purchases with 340B discounts grew from $5 billion in 2010 to $66 billion in 2023 as the network of contract pharmacy arrangements tied to the program expanded exponentially. Like the growth in hospital facilities affiliated with the program, an increasing number of contracted pharmacies are concentrated in affluent regions, not socioeconomically disadvantaged neighborhoods where underserved and uninsured patients are located.
This unchecked growth raises health care costs for employers and working families by promoting the increased use of higher-cost medicines and encouraging hospital consolidation, which shifts care to more expensive settings.
A recent IQVIA analysis estimated that state employee health plans incurred about $89 million in annual 340B “upcharges” on self-administered drugs, with $127 in increased 340B spend per patient and a 146% markup.
Put plainly, expanding 340B will lead to pricier plans, higher deductibles, and increased out-of-pocket payments.
Clearly, imposing greater health care costs on New York’s employers and workers by protecting the unchecked growth of the 340B program through the state budget does not align with Gov. Hochul and Albany’s stated affordability goals.
Employers support 340B’s original intent. That’s why we encourage Congress to reform the program and ensure it benefits patients — not large health systems. Right now, there’s no enforceable requirement that hospital 340B revenues be directed to patients who need help most.
As budget negotiations move forward, we urge the governor and lawmakers to remove 340B expansion language and focus their efforts on improving health care affordability, not undermining it.
Johnson is president of the American Benefits Council, an employee benefits trade association based in Washington, D.C.