New Report Demonstrates How Hospitals, Pharmacies & PBMs Exploit the Federal 340B Drug Program to the Harm of Disadvantaged Patients

New Report Demonstrates How Hospitals, Pharmacies & PBMs Exploit the Federal 340B Drug Program to the Harm of Disadvantaged Patients

Nation’s largest hospitals, pharmacy benefit managers (PBMs), and pharmacies abuse drug discount program to pocket savings intended for uninsured patients

Media Contact: Peter J. Pitts, ppitts@cmpi.org (212) 729-3618

SEPTEMBER 12, 2022, NEW YORK CITY, NY - The Center for Medicine in the Public Interest (CMPI) today released a new report that exposes how some of the nation’s largest and most prestigious hospitals, pharmacy benefit managers (PBMs), and pharmacies abuse the Federal 340B Drug Pricing Program to enhance their own profits at the expense of uninsured and low-income patients. The 340B program—created in 1992 to enhance prescription-drug access for low-income, and uninsured patients—allows hospitals and clinics to purchase medicines at highly discounted rates. The report, entitled 340B and the Warped Rhetoric of Healthcare Compassion, finds that hospitals are not only pocketing 340B revenue without providing commensurate charity care, but are also obtaining 340B medications at dramatically discounted rates for insured patients, for whom they can charge the full price and pocket the difference.

“340B is now the second largest government drug program after Medicare and Medicaid, yet it is not helping the patients it was intending to serve,” said CMPI President and former FDA Associate Commissioner Peter Pitts, who authored the report. “Some hospitals and hospital systems have come to treat 340B less as an assistance program and more as a profit-center. Their behavior is made possible by the fact that under current law, providers are under no obligation to reserve the discounts for needy patients or even report what they do with the savings. Just the opposite is happening. Eligible hospitals will obtain all their 340B medications from a drugmaker at the discounted 340B price and then bill privately insured patients, and even uninsured patients, for the drug's full list price, helping themselves to the difference as pure profit.” 

The report names the 10 hospitals which have the highest “Fair Share Gap,” meaning they spend less on charity care and community investment than they received in tax breaks. These hospitals with the largest fair share deficits accounted for more than 10% of the nation’s total. The top 10 hospitals with the highest Fair Share Gap include: 
 

1. Cleveland Clinic – Cleveland, OH (-$261 million)
2. New York-Presbyterian Hospital – New York, NY (-$237 million)
3. UCSF Medical Center – San Francisco, CA (-$208 million)
4. Massachusetts General Hospital – Boston, MA (-$179 million)
5. University of Michigan Health System – Ann Arbor, MI (-$169 million)
6. New York University Langone Medical Center – New York, NY (-$163 million)
7. Vanderbilt University Medical Center – Nashville, TN (-$157 million)
8. Brigham and Women’s Hospital – Boston, MA (-$142 million)
9. Hospital of the University of Pennsylvania – Philadelphia, PA (-$142 million)
10. Cedars-Sinai Medical Center – Los Angeles, CA (-$138 million)

According to the new report, 72% of private nonprofit hospitals had a fair share deficit. The combined fair share deficit for private nonprofit hospitals was $17 billion, with individual hospital deficits ranging from a few thousand dollars to $261 million.

Pitts continued, "This explosion of revenue for 340B institutions would hardly be problematic if there were also a simultaneous explosion in charity care programs to treat vulnerable patients. But the opposite scenario seems to be the case, as many charity care programs are declining.”

The report details abuse of the 340B program by hospitals across several states, including: 
 

• Three North Carolina hospitals (Duke University Health System, University of North Carolina Hospital, and Carolinas Medical Center, now known as Atrium Health Carolinas Medical Center) generated between $21 million and $135 million in revenue from the 340B program in 2012. For all three hospitals, uninsured patients comprised the lowest percentage of 340B patients, while commercially insured patients made up the largest percentage—as much as 74%.  

 

• In Tennessee, Methodist Le Bonheur Hospital and Methodist Healthcare-Memphis Hospitals generated $50 million in profits alone by billing the 340B program for chemotherapy and other drugs provided in an outpatient setting. Vanderbilt University Medical Center also reported a $157 million fair share gap, the seventh largest of any hospital in the country.

 

• In California, just two of the state’s largest hospitals in San Francisco (UCSF Medical Center) and Los Angeles (Cedars-Sinai Medical Center) generated a combined fair share gap of $346 million. Both hospitals fell into the top ten largest fair share gaps in the country.

The report also cites the growth in hospitals’ use of contract pharmacies, which largely dispense drugs to patients who have prescription drug insurance—not to uninsured or financially needy patients.  Between 2013 and 2020 alone, hospitals established more than 94,600 new contract pharmacy arrangements through the 340B program. In 2021, total sales of 340B-discounted drugs were estimated to be $44 billion, a nearly 16% increase from 2020.

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About The Center for Medicine in the Public
The Center for Medicine in the Public Interest is a nonprofit, nonpartisan research and educational organization that seeks to advance the discussion and development of patient-centered health care. For more information, visit www.cmpi.org.