CBO Report Finds 340B Program Increases Costs for Taxpayers

The 340B Drug Pricing Program is supposed to provide affordable drug access for patients but has instead morphed into yet another wasteful and poorly-targeted government boondoggle. The Congressional Budget Office’s (CBO) September 9th report on the program is just the latest confirmation that the program has increased costs for taxpayers and been compromised by massive abuse. The program encourages behaviors that increase federal spending and raise tax bills, including incentivizing the prescription of more (and expensive) drugs, reducing negotiated rebates for insurers, and increasing vertical integration among facilities. The 340B Drug Pricing Program is another well-intentioned government program gone awry, and taxpayers and consumers end up paying the price. 340B costs state and federal taxpayers an estimated $6.5 billion per year due to lost Medicaid rebates. The time for reform is now.

Findings from the CBO report affirm what other third-party reports have found for years: 340B Program spending is out of control. From 2010 to 2021, spending on drugs purchased through the 340B Program grew by an average of 19 percent annually, exceeding the market-wide growth in prescription drug spending. In addition, 340B drives up costs for the federal budget by incentivizing clinicians to prescribe more drugs and higher-priced drugs. The CBO report also found a connection between the implementation and expansion of the Affordable Care Act (ACA) and the program. ACA expanded participation in 340B, both directly and indirectly, through increasing eligibility to more hospitals and through Medicaid expansion. These changes enabled more hospitals to meet 340B eligibility, fueling soaring costs.

“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,” said Chairman of the House Committee on Energy and Commerce Rep. Brett Guthrie (R-Ky.). “I’m committed to conducing the necessary work to making sure the program works for both our safety net providers and patients.”

Congress must prioritize reforming the 340B Drug Pricing Program, restoring its fiscal integrity, and ensuring benefits reach low-income patients. This includes establishing clear definitions of eligibility criteria, such as identifying patients as uninsured or low-income individuals who are not eligible for Medicare or Medicaid. Codifying a patient definition into law will help reduce abuse of the program and ensure it benefits the intended patient population. Currently, there are no patient protections and no requirements for how hospitals use 340B discounts. This has led to massive abuse of the program and increased costs for taxpayers. Strengthening oversight through the Centers for Medicare and Medicaid Services to prevent duplicate discounts and enforce stricter reporting requirements will promote transparency and accountability. Given the numerous reports highlighting abuse and inefficiencies in the program, these reforms are essential to saving taxpayer dollars and ensuring low-income patients receive the benefits they are entitled to.