Dutch Rojas, founder of Bliksem Health, said that the 340B Drug Pricing Program has expanded beyond its original intent of supporting safety-net hospitals and is now being leveraged by large hospital systems to generate revenue through specialty care services such as oncology.
"The 340B program was designed to help safety-net hospitals serve the uninsured. Methodist Le Bonheur made $50M in year one after acquiring a cancer clinic. The safety net became the fishing net," Rojas said in a statement on social media.
Rojas pointed to Methodist Le Bonheur Healthcare, a Tennessee-based nonprofit hospital system, and its arrangement with West Clinic as an example of how hospital systems can benefit financially from the program.
Federal prosecutors alleged that the arrangement allowed Methodist Le Bonheur Healthcare to purchase oncology drugs through the 340B program and bill Medicare at hospital outpatient rates. According to a U.S. Department of Justice complaint, the structure generated about $50 million in profit in 2017 by combining access to discounted chemotherapy and other infused drugs with facility-fee billing tied to hospital ownership.
Congress created the 340B Drug Pricing Program in 1992 under the Veterans Health Care Act. The program requires pharmaceutical manufacturers participating in Medicaid to provide certain outpatient drugs to eligible hospitals and clinics at reduced prices. Covered entities are expected to use the savings to expand services for uninsured and low-income patients. The program is administered by the Health Resources and Services Administration and includes thousands of hospitals and contract pharmacies nationwide.
The scale of the program has grown significantly over time. An IQVIA report found that the 340B market reached $124 billion in covered outpatient drug purchases in 2023, making it one of the largest drug purchasing channels in the country. Oncology and antiviral medicines were among the most exposed categories, with average 340B discounts of 40% to 41% and combined 2023 revenue of $21.5 billion, highlighting how hospital-owned cancer care has become a major profit center within the program.
A separate analysis found that only 1.4% of 340B prescriptions at contract pharmacies provide any direct savings to patients. Most of the revenue from program discounts is retained by hospitals and intermediaries, leaving limited benefit for patients, according to Policy Research at Johnson & Johnson.
Rojas is the founder of Bliksem Health and Physician Capital and serves on the board of the Physicians for Patient Protection Action Network. He is known for his work on healthcare financing, physician-led care, and policy issues affecting independent medical practices and hospital systems.
