Spending on 340B drug program rose to $43.9B in 2021, CBO says

Over a little more than a decade, spending on the federal 340B drug program rose to $43.9 billion in 2021, according to a new report from the Congressional Budget Office.

The program’s spending has risen more than six-fold since 2010, when it was $6.6 billion, the report states. Spending increased by an average of 19% annually, according to the Congressional Budget Office, a nonpartisan research arm of Congress.

The 340B program allows hospitals to purchase some outpatient drugs, including cancer medications, at lower prices. Hospitals say the program is vital to support patient care and maintain essential services in vulnerable communities, but critics say the program has grown beyond its initial purpose of helping hospitals with a high percentage of patients with lower incomes.

The CBO report is likely to fuel more debate about the scope of the 340B program.

Rep. Brett Guthrie, a Kentucky Republican and chairman of the House Energy and Commerce Committee, said the report has confirmed some of his concerns about the 340B program.

“Today, the Congressional Budget Office has further validated my long-standing concerns that the 340B program—while an important lifeline to many of our safety net providers—has the ability to be abused and drive-up overall health care costs for Americans,” Guthrie said in a statement.

The CBO said some of the increase is tied to marketwide trends and greater use of some drugs in the 340B program.

But the CBO also cited other key factors, including “the integration of hospitals and off-site clinics, increased facility participation after the implementation of the Affordable Care Act, and expanded use of off-site pharmacies.”

In 2021, 2,530 hospitals participated in the 340B program, which represented a little less than half of all the nation’s community hospitals, the report stated.

The release of the report comes just as hospitals are pressing federal officials to take action against some drug companies who want to shift from discounted prices on drugs to a rebate model. Under that model, hospitals would have to buy drugs at full cost and then get reimbursed by the drug companies.

The American Hospital Association sent a letter to the Federal Trade Commission and the Justice Department urging them to investigate and determine if those companies are engaging in actions that would violate antitrust laws.

“If successful, this concerted effort would essentially obligate America’s safety-net hospitals to advance interest-free loans to the world’s largest and most profitable drug companies. This new ‘rebate model’ would inflict untold harm on hospitals, patients and communities,” the AHA wrote in its letter.

The Health Resources & Services Administration has said that it wants to test the rebate model in a pilot program, but hospitals are balking.

Maureen Testoni, president and CEO of 340B Health, a group advocating for hospitals participating in the 340B program, said the rebate model would force some hospitals to spend tens of millions of dollars while they wait for rebates.

“We remain deeply concerned about the financial and administrative burdens the rebate approach will place on 340B hospitals,” Testoni said in July.

President Trump’s administration has indicated it’s taking a look at the scope of the program.

Trump issued an executive order directing Health & Human Services Secretary Robert F. Kennedy Jr. to conduct a survey “to determine the hospital acquisition cost for covered outpatient drugs at hospital outpatient departments.”

Hospitals are worried that the Trump administration is looking to reduce 340B payments to hospitals.

Bruce Siegel, MD, president and CEO of America’s Essential Hospitals, said in April that the order would lead to “significant Medicare payment cuts for hospitals participating in the 340B Drug Pricing Program and would devastate essential hospitals and the patients they serve.”

In his first term, Trump reduced 340B payments, costing participating hospitals about $2 billion annually.

When Trump reduced Medicare payments to the 340B program, hospitals launched a legal battle, ultimately winning a unanimous decision from the U.S. Supreme Court in 2022.

However, the high court didn’t rule that Trump lacked the authority to change payments. The justices found that Medicare didn’t follow the proper procedure in changing payments because it didn’t perform a required survey.

This time around, Trump has told the health department to perform such a survey, which could lay the groundwork for changes in 340B payments.

Some lawmakers have introduced legislation that would have tightened eligibility requirements for hospitals that are looking to participate in the 340B program.