Congress has rightly increased its focus on healthcare affordability this year and is working to better understand the drivers of high patient costs. As a pediatric rheumatologist in practice for nearly 40 years, I have seen healthcare costs climb, forcing families to make impossible choices to afford care for their children. This scrutiny is long overdue and Congress, especially House Energy & Commerce Health Subcommittee Chairman Morgan Griffith (R-Va.), has rightly focused its attention on a little-known federal program called 340B that is secretly inflating costs not only in Virginia, but nationwide.
The second largest federal prescription drug program in the country, the 340B Drug Pricing Program allows eligible hospitals and clinics to purchase highly discounted medications on the condition that those savings are directed to lower drug costs for those who need the savings the most. What was meant to be a patient-focused program is now a hospital markup program where large, tax-exempt hospital systems buy discounted drugs, mark them up by as much as 1,000% or more and bill patients and insurers the list price. Meanwhile, these hospitals provide little transparency while facing minimal accountability for how they use these 340B profits.
At a recent House Energy and Commerce Health Subcommittee hearing, large hospital executives testified about the cost pressures facing patients and families. Chairman Griffith, along with other members of Congress, rightly questioned whether hospital systems are using 340B savings to lower patient costs or using the program to generate additional revenue. His expressed concerns reflect a growing recognition in Congress that the 340B program is raising costs for all Americans while not adequately serving the vulnerable patients for which it was intended.
In a single year, disproportionate share hospitals, who care for the majority of 340B participants, earned over $44 billion in estimated profits from the 340B program. At the same time, studies have found that some 340B hospitals, including those who treat cancer patients, pursue more aggressive medical debt collection practices than non-340B hospitals. As a physician who has spent decades caring for children with chronic illnesses, I am appalled that a program intended to support the most vulnerable patients is now so disconnected from the people it was created to help.
Independent practices, that often aren’t eligible for 340B, are the backbone of our healthcare system. Yet they face increasing financial pressures as hospital systems expand their reach and purchasing advantages. A Congressional Budget Office (CBO) report confirmed that 340B incentivizes the consolidation and integration of hospitals and off-site clinics as hospitals capitalize from the 340B program. As 340B hospitals generate increased capital, they increase their ability to consolidate their markets, especially in specialty care. Meanwhile, local providers who offer more cost-effective care for patients struggle to stay afloat. If forced to close their doors, their patients may be forced to travel long distances and lose personalized care.
Chairman Griffith’s oversight efforts reflect a broader and bipartisan concern: when federal policy creates large financial flows within the healthcare system, there must also be clear visibility into how those resources are used and who ultimately benefits. Though largely hidden from public view, the 340B program increases all of our healthcare costs as a hidden tax expenditure. Not only could it reduce federal tax revenue by as much as $200 billion over the next decade, but it also results in higher costs for commercial insurances. Further, by marking up discounted 340B medicines, eligible hospitals and clinics are overcharging state employee health plans by $1.8 billion annually. The ripple effect is costing federal, state and local governments, reducing $17 billion in federal and state tax in 2023 alone. Money that could be going toward higher wages and public schools is instead padding the bottom lines of brand-name hospitals.
There is a growing consensus across policymakers, providers and patient advocates that 340B reform is critical so that we can preserve the program for those who need it. The program should be held accountable with more transparency and ensure that all savings are clearly tied to patient benefit. I am grateful to Rep. Griffith for speaking up and standing up for Virginians, demanding answers and holding hospitals accountable. Four out of five Virginians agree that 340B reform is needed to ensure that vulnerable patients have access to the care they deserve. Congress must continue to build on this momentum and pass common sense legislation to get 340B back on track.
Dr. Harry L. Gewanter is a Richmond-based pediatrician, pediatric rheumatologist and a board member of the Coalition of State Rheumatology Organizations (CSRO).
