340B Drug Pricing Program

340B is a federal program, named for a section of the Public Health Service Act, that lets certain hospitals and clinics buy outpatient drugs at steep discounts, typically 25 to 50 percent below list price and sometimes close to free. The program started in 1992 for safety-net providers: community health centers, Ryan White HIV clinics, and hospitals that treat a large share of low-income patients. The idea was to stretch scarce federal dollars so those providers could serve more people.

What has happened since is the part employers should understand. A 340B hospital can buy a drug at the discounted price and then bill a commercial plan the full negotiated rate, keeping the spread. The program does not require the savings to be passed to the patient or the plan. The program grew from about $2 billion in purchases in 2005 to more than $66 billion in 2023, and hospitals have added thousands of outpatient clinics and contract pharmacies in higher-income neighborhoods to capture 340B margin on commercially insured patients. If an employee on your plan gets an infusion at a hospital-owned clinic, the hospital may have paid $1,800 for a drug it bills your plan $9,000 for. That is legal. It is also a reason infusion at a hospital outpatient department costs so much more than the same drug at a doctor's office or at home.

The takeaway: for infusions and specialty drugs, ask whether the same treatment is available at an independent infusion center or through home infusion. The drug is the same; the site is where the price changes.