The flawed 340B program is failing patients in Washington -- and enriching hospitals and pharmacy chains.
"The 340B program allows public and private hospitals in Washington to buy drugs at a 50% discount and charge patients full price," explains Terry Wilcox, co-founder and executive director at Patients Rising.
She adds, "When Washington hospitals receive federally-mandated drug discounts, those savings should go to patients."
Before we explain what's wrong in Washington, you need to understand the 340B program itself.
Congress created the 340B Drug Pricing Program in 1992 with a simple goal: help vulnerable, low-income, and rural patients access affordable medications through safety-net hospitals and clinics.
Under 340B, drug manufacturers sell medications at steep discounts—sometimes 50% off—to eligible healthcare providers. Those providers are supposed to use the savings to serve more patients who can't afford care.
That was the promise. Here's the reality.
Today, many 340B hospitals don't pass the savings on to patients. Instead, they buy drugs at discounted prices and charge patients the full retail price. It's a classic "buy low, sell high" scheme, except it's funded by a federal program meant to help the poor.
The profits can be staggering. According to a New York Times investigation, one 340B hospital bought a breast cancer treatment with a list price of $2,700 through the 340B program, then billed insurance more than $22,700.
After her insurance paid $10,000, the hospital went after the patient for another $2,500.
The problem exploded in 2010 when federal officials allowed hospitals to partner with unlimited numbers of retail pharmacies. Suddenly, major corporate pharmacy chains began cashing in on 340B discounts. Pharmacy benefit managers joined the party. Contract pharmacy arrangements shot up 4,228% in just ten years.
Money that should help patients now flows to corporate middlemen instead.
The numbers from Washington tell a troubling story.
Washington patients and employers pay an extra $218 million because of 340B hospital markups, according to a recent analysis by IQVIA. That burden on Washington pocketbooks will increase to $262M if the state changes the law to further protect 340B contract pharmacies.
340B pharmacies should be growing in poor and underserved communities. But, roughly half of Washington's 340B pharmacies supposedly serving low-income patients are located in affluent neighborhoods in Washington.
One in four 340B pharmacies supposedly serving poor patients in Washington are located outside the state. Some of Washington’s low-income patients are even required to utilize for-profit pharmacies in Florida.
"How does a pharmacy in South Beach help a struggling family in Spokane?" asks Terry Wilcox of Patients Rising.
Washington's 340B hospitals provide charity care at just 1.52% of their operating expenses. The national average is 2.15%. Hospitals getting billions in taxpayer-funded discounts to help poor patients are actually doing less for poor patients than hospitals that get nothing from the program.
Where is all that 340B money going? Not to patients.
Washington needs actual reform that puts patients first. We need Congress to act!
Transparency Requirements: Hospitals should publicly report all 340B revenue and demonstrate how funds support low-income patients or underserved communities. Right now, they don't have to tell anyone how they spend billions in taxpayer-funded discounts.
Local Investment Mandates: 340B savings should benefit Washington patients. Ban out-of-state arrangements. Require hospitals to prioritize medically underserved areas, not wealthy suburbs.
Patient Protection Standards: Require hospitals to offer 340B discounts to uninsured and underinsured patients. If a hospital buys a drug at a 50% discount, patients should see savings at the pharmacy counter.
Charity Care Accountability: Tie 340B participation to meaningful charity care requirements. Hospitals receiving billions in discounts should provide substantial charity care—not less than hospitals that get nothing.
Independent Audits: The federal agency overseeing 340B audits just 0.33% of participating entities each year. Medicare audits 29% of its providers. Congress should require requiring regular independent audits with real consequences for abuse.
These reforms would preserve the 340B program for true safety-net providers while stopping large hospitals and pharmacy chains from exploiting it.
A 2024 U.S. Senate investigation exposed the scope of 340B abuse nationwide. Just two hospital systems generated over $1 billion in 340B revenue in recent years without passing savings to patients.
Senator Bill Cassidy, who chairs the Senate Health, Education, Labor, and Pensions Committee, was direct: "Congress needs to act to bring much-needed reform to the 340B Program. This investigation underscores that there are transparency and oversight concerns that prevent 340B discounts from translating to better access or lower costs for patients."
If you're managing diabetes, cancer, heart disease, or any chronic condition in Washington:
Join the Patient's Right to Know Campaign. Visit patientsright2know.org to learn more about 340B reform efforts nationwide.