Unfulfilled Expectations

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  • 03/31/2014

A new analysis by the Alliance for Integrity and Reform of 340B indicates that a substantial portion of hospitals enrolled in the 340B program provide only a minimal amount of charity care; as such, they may not be fulfilling Congress’ expectations. 

The study, compiled from newly available public data analyzed by Avalere Health, noted that the 340B drug discount program was designed by Congress to help safety net providers improve access to prescription medicines for uninsured, vulnerable patients in the outpatient hospital setting. Yet, the analysis shows, most hospitals that benefit from the program provide less charity care than the national average for all hospitals, and charity care in about a quarter of all 340B hospitals represents 1% or less of total patient costs.  A small number of 340B hospitals provide the lion’s share of all charity care delivered by 340B hospitals.

The analysis raises questions about whether the current 340B eligibility criteria specifically used for DSH hospitals are serving the spirit and intent of the law in that they may be overly broad and not just target those entities that serve high numbers of vulnerable, uninsured patients.  Specifically, the new research shows:

       More than two-thirds of hospitals that receive 340B drug discounts provide less charity care as a percent of patient costs than the national average for all hospitals, including for-profit hospitals which do not qualify for 340B under current eligibility criteria.

       For approximately a quarter (24%) of 340B hospitals, charity care represents 1% or less of the hospitals’ total patient costs.

       Approximately one-fifth (22%) of 340B hospitals provide 80% of all charity care delivered by 340B DSH hospitals.

Currently, hospitals that qualify for the program claim 340B discounts for most outpatient prescription drugs, for both insured and uninsured patients.  And while the 340B program lowers outpatient drug costs for qualifying hospitals on the presumption that it will help significant numbers of vulnerable, uninsured patients, participating hospitals currently see no restrictions on the way they spend the revenue generated if they charge both insured and uninsured patients higher prices than the 340B-discounted price. 

This stands in contrast to many other covered entities that participate in the 340B program as a result of a specific grant (often referred to as “grantees”) from the U.S. Department of Health and Human Services.  The grant-approval process typically requires these providers to demonstrate that they provide services to certain specified vulnerable populations, at times based upon the patients’ “ability to pay”, and that the entities reinvest resources into services for those populations.

340B's broad eligibility criteria for hospitals have led to an explosion in the number of hospitals that have come into the 340B program. Today, one-third of all hospitals in the country participate in the 340B program and get 340B discounts; that number is expected to grow, particularly absent an effort to tighten eligibility requirements. Drug purchases through the 340B program will almost double, from $6 billion in 2010 to $13.4 billion by 2016, though little of the billions of dollars in discounts has been directly tracked to or linked with charity care for vulnerable indigent patients.

The complete report, “Unfulfilled Expectations,” can be found here.


Center for Medicine in the Public Interest is a nonprofit, non-partisan organization promoting innovative solutions that advance medical progress, reduce health disparities, extend life and make health care more affordable, preventive and patient-centered. CMPI also provides the public, policymakers and the media a reliable source of independent scientific analysis on issues ranging from personalized medicine, food and drug safety, health care reform and comparative effectiveness.

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