Contract Pharmacies’ Troubling Role in the 340B Drug Discount Program

“Indeed, there is little evidence to suggest that many vulnerable patients see any direct benefit from the expanding 340B contract pharmacy program, particularly because data indicates that neither the pharmacy nor the patient know that the transaction is “340B” at the point of sale. As a result, the patient often does not benefit from the covered entity receiving the 340B discounts.”

-AIR340B Report, 2014

Through guidance in 2010 issued by the Health Resources and Services Administration (HRSA), 340B covered entities can have an unlimited number of “contract pharmacy arrangements” in the 340B Drug Discount Program. These arrangements are often with for-profit pharmacy chains like CVS, Rite-Aid, Walmart, and others. Since the guidance 10 years ago, these large chain pharmacies jumped on the opportunity to use the 340B drug discount program for profit, with the number of those participating in the program increasing from 1,300 to nearly 28,000 – that’s more than 21 times over.

Despite the fact that this safety-net program was created to support nonprofit entities that serve vulnerable or uninsured communities, for-profit corporations have been utilizing the program as a profit-making tool – at the expense of many low-income Americans. This is a huge cause for concern, and multiple government oversight agencies and Congress are not confident these arrangements are benefiting patients. We agree.

Below are key findings from reports that provide troubling evidence that 340B disproportionate share hospitals (DSH) hospitals and contract pharmacies are not improving access to medications or improving health outcomes for low-income Americans.

  • In a report conducted by the Government Accountability Office, the majority of hospitals surveyed noted 340B discounts were not shared with vulnerable patients when picking up their prescription from contract pharmacies. (Government Accountability Office, 2018)
  • Roughly 75 percent of contract pharmacies participating in 340B are for-profit chains like CVS and Rite-Aid. (Government Accountability Office, 2018)
  • The expansive growth of DSH hospitals and contract pharmacies in 340B has not translated into measurably better health outcomes for low-income Americans and instead has increased profits for DSH hospitals through their arrangements with contract pharmacies. (Marshall University, 2018)
  • There are no direct incentives for 340B DSH hospitals to use financial gains to improve or enhance care for low-income patients. (National Journal of Medicine, 2018)
  • Some 340B DSH hospitals did not offer the discounted 340B price to uninsured patients at contract pharmacies. (Office of the Inspector General, 2014)

It’s past time we put patients first. We need to rein in profit incentives for 340B DSH hospitals and contract pharmacies to get the program back on track, so patients benefit.