Adam O'Neal, Opinion Editor at The Washington Post, said on April 18 that the 340B drug discount program has shifted from its original purpose as a safety-net tool to a lucrative subsidy for large hospital systems.
"Instead of serving as a safety net for hospitals in vulnerable communities, the program has become a profit-making venture for big businesses," O'Neal said.
The issue is significant because the 340B program was initially designed to help hospitals in underserved areas by allowing them to purchase drugs at discounted rates. However, recent trends show that the financial benefits are increasingly accruing to major hospital systems rather than directly supporting vulnerable patients.
"In 2010, about $6.6 billion in drugs were purchased through the program. By 2023, that number multiplied tenfold," he said. "The system creates nasty distortionary effects. For example, participating providers have an incentive to use more expensive, brand-name products, since doing so increases their profit margin from reimbursements. That explains why branded drugs accounted for almost 90 percent of 340B sales in 2023."
According to the Congressional Budget Office, 340B purchasing grew from $6.6 billion in 2010 to $43.9 billion in 2021 at an average annual rate of 19 percent. Hospitals drove most of that expansion and disproportionate-share hospitals accounted for about 78 percent of all spending by 2021; this growth extends far beyond a narrow safety-net role and gives large hospital systems a major stake in preserving the discount-to-reimbursement spread.
Discounted purchases under the program reached $66.29 billion in 2023 according to data from the Health Resources and Services Administration. Specialty medicines represented only 36 percent of units purchased but made up 60 percent of total purchases, indicating heavy concentration in expensive therapies where reimbursement gaps can be especially large.
Contract-pharmacy arrangements also expanded rapidly—from about 1,300 in 2010 to nearly 20,000 by 2017—according to a Government Accountability Office report. This shift pushed discounted drugs beyond original on-site dispensing models and widened oversight challenges related to duplicate discounts and diversion while making it easier for revenue capture without direct savings passed on to patients.
According to The Washington Post Opinions section's description of its editorial process, "The Post’s View" editorials reflect the institutional voice of its Editorial Board.
