WASHINGTON— Growth in the 340B Drug Pricing Program is estimated to cost U.S. workers and their employers about $23 billion per year in higher employer-based insurance premiums, according to a new white paper published by Health Capital Group and the National Pharmaceutical Council (NPC).
Proponents of the 340B program often describe it as “costless” to American taxpayers and the wider system of healthcare. However, research shows that the program’s size and scope create significant incentives for inefficiency that impact the cost of employer-sponsored health insurance.
The white paper, “The 340B Drug Purchasing Program and Commercial Insurance Premiums,” estimates how 340B growth is associated with higher commercial insurance premiums by comparing increased use among 340B hospital sites at the state level with growth in employer-based health insurance premiums. The white paper is authored by Neal Masia, PhD, of Health Capital Group and James Motyka, PharmD, Kimberly Westrich, MA, and Jon D. Campbell, PhD, of the National Pharmaceutical Council.
"We already know that the 340B program generates tens of billions of dollars in profits for covered entities, pharmacies, and myriad supply chain intermediaries," said Dr. Masia. "The program rewards hospital consolidation, incentivizing covered entities to generate revenue through hospital-affiliated outpatient care rather than using resources for community care. This may create significant inefficiencies beyond just drug costs, and our research suggests the effects are not small."
The study found that covered entity purchases of medicines at discounted 340B prices more than tripled between 2017 and 2023, topping $60 billion. Over the same period, the authors estimate that growth in 340B hospital use at the state level accounted for about 8% of the overall growth in employer-based health insurance premiums.
Applied nationally to the 165 million people covered by employer-sponsored insurance, this study suggests that 340B growth is tied to marked health insurance cost increases for employers and employees. More specifically, the study found that after adjusting for confounding factors:
- Growth in 340B was associated with about $137 in additional annual premium costs for single coverage and $415 for family coverage (95% confidence interval $53 - $222 and $167 - $665, respectively), or about 8% of the overall increase in employer-based premiums over the period.
- 340B expansion was associated with approximately $23 billion in additional employer-based healthcare expenses in 2023. Of the $23 billion in total, employees were estimated to pay about $4.5 billion per year in added insurance premiums.
- States with a higher density of 340B-affiliated hospital sites have employer premiums that are about 4.5% higher than lower-density states.
"When employers are paying high prices for medicines purchased through 340B, it causes a ripple effect for commercially insured Americans," said Dr. Campbell. "Employers lose some of their negotiated rebates when prescriptions are filled as 340B eligible, and those costs are paid by employers and employees in the form of higher premiums."
This study adds to the body of evidence about the hidden costs of the 340B program:
• Work published by IQVIA explored how the 340B program costs state and local government plans an estimated $1.0 billion and all employer-sponsored plans an estimated $6.6 billion in 2023, as well as the implications of 340B revenue sharing agreements.
- Peer-reviewed research from NPC in INQUIRY found that hospitals and covered entities serving wealthier communities are collecting higher margins on 340B drug purchases.
- Analyses by the National Alliance of Healthcare Purchaser Coalitions and Health Capital Group highlighted how large 340B hospitals charge 7.5% more than non-340B hospitals for high volume medical procedures, which translated to an extra $36 billion a year in hospital spending for commercial employers and payers.
"With a lack of transparency and limited federal oversight, the 340B program often serves as a drug markup program for hospitals and covered entities," said Dr. Campbell. "This is not a ‘victimless crime’ as many assume, but a program that continues to grow with considerable costs for employers, states, and patients."
