There is no question the 340B drug discount program provides a critical safety net for America’s most vulnerable patients; especially those served by disproportionate share hospitals, federally qualified health centers, and safety net providers, such as Ryan White HIV/AIDS clinics. But what started in 1992 as a relatively small prescription drug discount program for qualifying facilities has exploded in size due to the participation of hospitals that often deliver relatively little charity care.  

One factor fueling this growth is hospital acquisition of community cancer clinics, which may qualify for participation in the program after being acquired by a 340B hospital. This huge expansion is unsustainable and threatens the 340B program’s future. Moreover, it has had the unintended consequence of increasing the costs of cancer care for seniors and taxpayers.  


Some defenders of the program turn a blind eye to the 340B program’s growth and point fingers to deflect constructive discussions about making changes to strengthen it. For example, a popular statistic used to minimize its size is that 340B represents only 2.3 percent of overall U.S. drug spending. In reality, that number is actually 5 percent now and is expected to reach 8 percent by 2019. However, even those numbers misrepresent the enormous scale of the 340B program, particularly when it comes to cancer care. 

In 2004, hospitals accounted for 45.2 percent of 340B drug purchases, but that almost doubled by 2013, with hospitals accounting for 88.9 percent of all 340B purchases. Close to 25 percent of all Medicare Part B drugs purchased over those years were under the 340B program. And if you look at hospital outpatient facilities — understanding that 340B in the hospital is an outpatient program only — 58 percent of all drug purchases and over 60 percent of all oncology drugs purchases in 2013 were 340B.  

Understanding the profit generating potential of the 340B program makes it clear why the program has expanded into hospitals’ cancer care. Once a 340B hospital purchases a private oncology practice, that hospital may be able to receive 340B discounts for medicines prescribed and infused at that practice. This allows the hospitals to receive discounts of 30 to 50 percent that do not have to be passed on to patients.

The spread between the discounted 340B purchase price and the reimbursement from insurers and patients is pure profit for the hospital. This provides a powerful incentive to purchase independent community cancer clinics. In fact, 3 out of 4 acquisitions of cancer clinics were by 340B hospitals from 2013-2014. 

The problem with the shift from independent community cancer clinics to hospitals, especially those with 340B discounts, is that it increases costs for both patients and taxpayers. The costs for cancer care can be more than 50 percent higher in 340B hospitals than in the community setting.  For patients responsible for their 20 percent Medicare Part B co-pay, this is no small number. The difference has even raised concern at the independent watchdog Government Accountability Office that noted hospitals have a financial incentive in the 340B program for prescribing “more drugs or more expensive drugs.”   

There is no doubt that some hospitals are using 340B profits to serve patients in need. However, those institutions, along with others caring for financially vulnerable patients, should be the first to call for a new level of accountability and transparency to ensure that the 340B program does what it is intended to do: catch patients falling through the treatment cracks. There is no guarantee that patients seen in 340B hospitals are receiving the benefits of 340B discounts, and that is a serious problem. We need to ensure that the 340B program is about patients, not profits.   

Okon is executive director of the Community Oncology Alliance (COA).