New Predatory PBM Game Uncovered
How PBMs Are Exploiting the 340B Program for Patients in Need
The 340B drug pricing program was designed to help patients in need access discounted medicines. The program requires that drug manufacturers sell prescription drugs at discounted prices to eligible hospitals, enabling them, in turn, to dispense the drugs at reduced prices. Unfortunately, the 340B program has grown extremely complex, without the transparency or procedural guardrails necessary to ensure that discounted 340B prescription drugs make their way to patients who need them, rather than to profiteering PBMs and unscrupulous hospital partners who resell the drugs at higher commercial prices and pocket bloated profit margins from each sale.
What Do PBMs Have to Do with 340B Programs?
Pharmacy Benefit Managers (PBMs) own or are affiliated with the majority of pharmacies (known as “340B contract pharmacies”) that enter into contracts with hospitals designated as “340B covered entities” entitled to purchase prescription drugs at discounted rates. The number of contract pharmacies has exploded - less than 1% of pharmacies participated in contract arrangements in 2010. By 2022, it expanded to over 40%. One analysis estimates that $2.58 billion in 340B savings intended for vulnerable and low-income patients were siphoned away by PBM-controlled pharmacies in 2022. Research has also shown that more than 50 cents of each dollar in profits that 340B contract pharmacies receive go to just four multi-billion dollar corporate PBMs.
Most Vulnerable Communities Are Harmed
As PBMs’ domination over 340B drug dispensing grows unchecked, PBMs cause grievous harm to America’s most vulnerable communities:
340B Hospitals Have Grown More Reliant on PBM-owned Contract Pharmacies:
As the number of contract pharmacies grows rapidly, “340B hospitals” rely more and more on PBM-owned or affiliated pharmacies to dispense prescription drugs and administer claims. In 2024, 340B hospitals had about 116,000 total relationships with contract pharmacies (five PBMs accounted for nearly 80% of this total). The number of these contractual relationships has grown even more quickly than the number of contract pharmacy locations.
Increased PBM Market Share Directs Savings Away from Patients In Need:
The FTC has reported that the three largest PBMs control 80% of prescriptions filled in the U.S. Currently, the market share of the largest PBMs is expanding yet further, as 340B hospitals and health systems trend toward contracting primarily with large PBM-owned specialty pharmacies. PBMs can extract 3-4 times greater profit margins in the 340B program than in the commercial market, redirecting savings intended for patients in need.
Patients Steered to Contract Pharmacies Hinders Competition from Lower Cost, Independent Pharmacies:
PBMs steer patients to their own pharmacies. Nearly 70% of 340B contract pharmacies were associated with a PBM – either vertically integrated (53%) or affiliated (16%). 340B hospitals also steer patients to their PBM-owned or affiliated contract pharmacies. As a result, independent pharmacies have been forced out of business at alarming rates, depriving rural and urban communities choice between pharmacies on the basis of price and access to prescription medicines. The decline of market competition in vulnerable communities further raises costs of medicines for their residents.
Lack of Transparency Thwarts Accountability:
The size and scale of the 340B program, combined with significant lack of accountability and transparency, allows PBMs and 340B hospitals to siphon money at accelerating rates that was intended by the 340B program for patients in need.
Call to Action
PBMs have proven to be nimble and adept at creating a multitude of predatory schemes to divert savings from patients to their own outsized profits. The most recent PBM games to exploit the 340B program target the most vulnerable, low-income communities, undermine the 340B program’s intent, and raise barriers to affordable access to medications.
Policymakers must stop efforts to expand the broken 340B program until the defects enabling widespread exploitation of the program are fixed. These fixes should include:
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Prohibiting PBM profits derived from pricing of 340B program drugs.
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Increasing transparency into pricing practices and revenue flows of 340B hospitals, PBM-owned or affiliated contract pharmacies, and the contractual relations between them.
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Preventing patient steering.
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Requiring 340B hospitals spend an adequate amount of 340B drug revenues on health programs for in-need patients.
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Enacting guardrails to ensure that 340B savings actually make their way to patients in need.