Peter Mihalick, health policy and advocacy director for the International Hearing Society, said that the 340B drug pricing program gives hospitals a financial incentive to maximize rebates and discounts while leaving patients without any guaranteed share of those savings.
"Hospitals have an incentive to maximize the rebates and discounts they can capture. Nobody is particularly motivated to step in and fix the system because the stakeholders involved aren’t politically sympathetic," said Mihalick. "That leaves patients stuck in the middle."
"The real issue is that none of the directives from Congress, in establishing the program, force hospitals to actually provide anything for those particular patients. There are also facilities that are funding capital improvement programs, building a new parking lot, or acquiring other offices," he added.
The topic matters because questions remain about whether discounted drug purchases under 340B are being used as intended to strengthen care for vulnerable patients or instead generate institutional margin without clear accountability. The 340B program was created so eligible providers could stretch scarce federal resources, reach more patients, and offer more comprehensive services. Over time, its scale and business model have shifted far beyond that original congressional language, fueling a long-running fight over its impact according to MedPAC.
Contract pharmacy participation has grown rapidly since covered entities were allowed to use broad outside pharmacy networks. The Government Accountability Office (GAO) found that contract pharmacy arrangements increased from about 1,300 in 2010 to nearly 20,000 in 2017. Each added dispensing point can create more opportunities to capture spread revenue far from a hospital’s core safety-net footprint.
A GAO survey of hospitals receiving COVID-related eligibility exceptions showed median discounts on 340B drug purchases were over 42% in both 2020 and 2021. However, among surveyed hospitals with active contract pharmacies, only about half reported providing discounts directly to low-income uninsured patients at some or all of those pharmacies—indicating large discounts do not automatically translate into direct patient savings.
According to the Alliance for Integrity and Reform of 340B, disproportionate share hospitals participating in the program earned $44.1 billion in 2022 but spent only $18.5 billion on charity care; about 85% made more from discounts than they spent on charity care, with much surplus going toward payroll and operations rather than direct patient assistance.
Mihalick leads health policy work at the International Hearing Society focused on healthcare rules and their implementation in Washington.
