340B Reform Gathers Steam: Insights from the CBO and the 340B ACCESS Act
In May’s edition of Policy Corner, we explored the 340B Drug Pricing Program, established by Congress in 1990 to help safety-net healthcare providers stretch limited resources and expand access to affordable prescription drugs for low-income and vulnerable patients. Through the program, eligible hospitals and clinics, known as “covered entities,” can purchase medications at discounted prices, with the goal of reinvesting those savings into patient care, expanded services, and community health initiatives.
Over the years, however, 340B has grown far beyond its original scope and is now the second-largest federal drug program after Medicare Part D. While the program was designed to benefit underserved communities, a lack of transparency and accountability has limited oversight of how profits are actually used. Numerous studies and investigations have found that some covered entities operate contract pharmacy networks largely outside of underserved areas, using the program to boost revenue while local clinics serving vulnerable populations receive minimal support.
A striking example of this dynamic is Bon Secours Mercy Health, a large nonprofit hospital system scrutinized in a 2022 New York Times investigation. The report revealed that Bon Secours leveraged its 340B status at Richmond Community Hospital, a small, under-resourced facility in a predominantly Black neighborhood of Richmond, Virginia, while diverting profits through contract pharmacies and higher-reimbursement sites in wealthier, predominantly white suburbs. Despite the hospital’s lack of essential services, such as a functioning ICU, internal documents showed the system reported substantial financial gains from its 340B operations. One former executive described Richmond Community as a “shell” used to access 340B savings, while real investments were directed elsewhere.
Recent analysis by the Congressional Budget Office (CBO) confirms these concerns. Created in 1974, the CBO is a non-political agency that gives Congress independent, reliable analysis of the costs and economic effects of federal programs. Its reports help lawmakers understand how programs like 340B impact government spending, healthcare costs, and taxpayers. The CBO’s recent analysis highlights several key trends:
- By 2021, 340B facilitated nearly $44 billion in drug purchases, up from $6.6 billion in 2010.
- Integration of 340B-eligible hospitals and off-site “child” clinics allows large systems to apply discounts across their networks, giving them a competitive advantage over independent practices and promoting consolidation that can increase overall healthcare costs.
- Child sites are often located in healthier, wealthier, and better-insured areas rather than in the communities with the greatest need.
- While the number of 340B contract pharmacies has grown, their presence in vulnerable communities has declined.
Together, these factors shift costs onto the government, taxpayers, employers, and patients, highlighting how uncontrolled growth of 340B can undermine the program’s original mission of helping those most in need.
In response to these findings, some members of Congress have taken action. On September 10, Representatives Buddy Carter, BSPharm (R-GA) and Diana Harshbarger, PharmD (R-TN) introduced the 340B Affording Care for Communities and Ensuring a Strong Safety-Net Act (340B ACCESS Act). The legislation is designed to restore transparency, accountability, and patient-centered outcomes to the program.
The 340B ACCESS Act contains a suite of reforms aimed at ensuring that the program serves its intended beneficiaries:
- Direct Patient Affordability Requirements: Ensures that qualifying low-income and uninsured patients benefit directly from 340B through reduced out-of-pocket costs, whether they receive medicines from a covered entity, child site, or contract pharmacy.
- Codified Patient Definition: Clarifies who qualifies as a patient of a covered entity, ensuring the program only serves patients that are truly in need.
- Eligibility Rules: Establishes eligibility requirements for hospitals, child sites, and contract pharmacies to ensure that only entities that treat vulnerable patients participate.
- Limits on Middlemen Profits: Places restrictions on pharmacy benefit managers, contract pharmacies, and third-party administrators to prevent excessive profits that do not directly benefit patients.
- Transparency and Oversight: Requires standardized reporting on how 340B savings are used.
The introduction of the 340B ACCESS Act, along with the CBO’s findings, shows that lawmakers from both parties agree the program needs reform. The bill aims to clarify which patients are eligible, make sure medications remain affordable, and increase transparency so that the program better supports patient care, especially in underserved communities. It also addresses problems like middlemen profiteering, the rise of contract pharmacies, and the placement of child sites in wealthier areas, which have shifted program benefits away from those who need them most.
Careful implementation of the 340B ACCESS Act could keep the program’s benefits while closing loopholes that allow money to be prioritized over patients. As the program grows, clear rules, consistent reporting, and proper oversight are essential to ensure that 340B fulfills its promise: improving access to affordable medications for low-income and vulnerable patients across the United States.
