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The 340B program has come under increased scrutiny within the past five years. Opponents often claim it is misused by covered entities (CEs) to generate profits rather than help vulnerable patients. These criticisms often come from a misunderstanding of the program’s fundamental purpose and operational realities. So how does 340B truly function? And what role does it play in sustaining healthcare access for uninsured and underinsured patients?
The Core Intent of 340B
Congress created the 340B program in 1992 with a clear intent “to permit covered entities to stretch scarce federal resources as far as possible, reaching more eligible patients and providing more comprehensive services.” The program allows safety-net providers—such as disproportionate share hospitals (DSH), federally qualified health centers (FQHCs), and rural hospitals—to purchase outpatient drugs at discounted rates. These savings are not a loophole or unintended windfall; they are the foundation that enables these providers to continue offering care to communities that would otherwise go without. Moreover, the 340B program operates at no cost to taxpayers. The savings generated come from discounts provided by pharmaceutical manufacturers as a condition of their participation in the Medicaid and Medicare Part B programs—not from government funding.
Common Misconceptions
Misconception #1: “Hospitals Are Profiting Off 340B Instead of Helping Patients”
Critics often argue that CEs use 340B savings for financial gain rather than patient care. However, this overlooks a crucial fact: insured patients drive the savings that sustain uncompensated care. These savings are not government subsidies but rather manufacturer discounts designed to help safety-net providers reinvest in patient care.
Many CEs operate on razor-thin margins and are dependent on the revenue generated through 340B to keep their doors open. Free clinics, medication assistance programs, and community health initiatives for uninsured and underinsured patients are funded in part by these savings. Without 340B, many of these safety-net providers would be forced to reduce services or close altogether, leaving vulnerable populations with even fewer options for care. All providers that participate in 340B–even the largest and most prestigious hospitals– qualify because they serve a high volume of care to poor or other vulnerable patient populations such as those located in remote rural areas. Each of them uses their savings to invest in more services and programs for these patients such as free mobile clinics, transportation, language services or “meds to beds” programs.
Misconception #2: “340B Patients Are Not Receiving Direct Benefit”
Another misleading claim is that 340B patients do not see direct savings on their prescriptions. While 340B does not mandate direct patient discounts at the pharmacy counter, it enables CEs to support those who need assistance the most. Many 340B providers operate cash card programs and other patient assistance initiatives that directly pay for medications for uninsured individuals who cannot afford them. These programs, funded by 340B savings, ensure that those in need receive life-saving care without financial barriers.
Misconception #3: “340B Causes Higher Drug Prices for Everyone Else”
Pharmaceutical companies have attempted to frame 340B as a driver of increased drug costs. However, there is no evidence that the program inflates drug prices. The 340B discount is applied only to CEs, not to commercial insurers or non-340B providers. In reality, drug manufacturers continue to report record-breaking profits, even as they limit 340B participation and restrict access to discounted drugs for safety-net providers. The true cost driver in the pharmaceutical industry remains the unchecked pricing practices, not 340B.
The Bigger Picture: 340B’s Role in the Healthcare Safety Net
Efforts to restrict or weaken the 340B program ignore the broader reality of healthcare economics. Without 340B:
- Rural hospitals and clinics would face closure due to lack of financial sustainability.
- Fewer free and discounted medications would be available for uninsured and underinsured patients.
- Specialty care services, such as oncology and HIV treatment programs, would suffer funding shortfalls.
Conclusion
The 340B program is not a loophole, nor is it a financial scheme for hospitals or other CEs. It is a critical, congressionally mandated initiative designed to support health care providers serving the country’s most vulnerable populations. Mischaracterizing the program only serves to jeopardize access to care for those who need it most. As policymakers and stakeholders continue debating the future of 340B, it is essential to focus on facts—not industry-driven narratives designed to undermine the program’s effectiveness.
The bottom line: Policymakers must resist misinformation and recognize 340B’s vital role in sustaining access to healthcare. As stakeholders push for legislative and regulatory changes, it is crucial to ensure that any reforms the program strengthen—not dismantle—the ability of safety-net providers to care for their communities.
Larry Crowder is Vice President of 340B Solutions at Cervey. He can be reached at lcrowder@cervey.com.
