Impact of 340b pharmacy discounts on employer-sponsored health plans
June 3, 2025
Summary: 340b drug discount plans have expanded dramatically, and they decrease rebates available to employer-sponsored health plans.
Source: American Benefits Council, February, 2025
There have been many news stories recently about the 340b pharmacy discount program. The program began in 1992 to allow safety net hospitals and health centers to purchase steeply discounted drugs. The providers could then offer these drugs to needy patients at a deep discount or free, or sell these drugs for their usual prices and use those profits to subsidize unreimbursed care. This was a mechanism to subsidize charitable care without raising taxes and also allowed pharmaceutical companies to expand their markets. Initially, providers needed to dispense the medications at their facilities, although an increasing portion of 340b drugs are provided through contract pharmacies.
Purchases at discounted 340b prices rose to $66 billion in 2023. The expansion of Medicaid during the pandemic allowed more providers to qualify to participate in the 340b program, and the use of contract pharmacies has increased the scope of the program.
Pharmaceutical companies have resisted the expansion of 340b programs. Many have restricted the use of contracted pharmacies, although seven states have passed laws prohibiting such restrictions. Pharmaceutical companies don’t allow rebates on drugs purchased with 340b discounts, so these “discounts” can increase employer-sponsored plan pharmacy bills substantially. For example, if a provider dispenses a GLP-1 obesity medication (like Wegovy) through the 340b program, the employer would pay its wholesale acquisition cost (about $1,300 monthly), rather than the estimated $800 monthly it would cost after rebates.
IQVIA, a large data aggregation company, estimated in 2024 that 340b discount programs increased the cost of pharmacy in employer-sponsored health plans by $5.2 billion, or 4.2%.The American Benefits Council pointed out that the program can also encourage use of branded drugs when biosimilar or other less expensive alternatives were available.
Implications for employers:
Although 340b discounts are not targeted to employer-sponsored health plans, the program likely increases the costs of employer plans.
This is a good example of a well-meaning public policy with unanticipated consequences.
I agree with Jeff, "This is a good example of a well-meaning public policy with unanticipated consequences." 340B was designed to help Medicaid and community clinics bring competitive pricing into a system that can not have a formulary. These programs are complex, require a great deal of administrative over site and focus on cost alone. Yes, there are few that contract with community pharmacies and even have mail order. However, focusing on cost alone is an incomplete strategy. Addressing effective and efficient care/prescribing, patient adherence, and continuity of care with a focus on value not volume/cost alone is a smarter path.