A comprehensive data-driven analysis has revealed that the explosive growth of the federal 340B Drug Discount Program is overwhelmingly driven by increased utilization rather than pharmaceutical price increases, contradicting claims made by hospital advocacy groups and program defenders.
The study, published in Health Affairs Scholar, analyzed over 90% of branded and generic pharmaceutical product sales in the US from 2018 to 2024, spanning more than 100,000 individual outlets. The findings show that utilization increases accounted for 100.7% of 340B program growth during this period, while price increases contributed just 2.5%.
Program Growth Reaches Record Levels
The 340B program has experienced unprecedented expansion, tripling in size over the last decade. In 2024, the program reached $148 billion as measured by the list price value of products sold. The Health Resources and Services Administration (HRSA) reported that 2023 purchases climbed to $66.3 billion at heavily discounted prices, representing a 24% year-over-year increase.
This growth has occurred even as the vulnerable patient population the program was created to serve has halved over the same period. The program allows participating hospitals and health systems to purchase drugs at significant discounts while billing insurers for full price, creating substantial revenue streams.
Advocacy Groups' Claims Challenged
In response to criticism about the program's rapid expansion, 340B advocacy organizations have consistently attributed growth to manufacturer price increases rather than provider strategies to maximize utilization and profits.
340B Health argued that HRSA's figures "demonstrate the tremendous financial impact" of drug pricing in the "growth in overall prescription spending." An American Hospital Association executive asserted that the "340B Program has grown mostly due to drug manufacturer pricing decisions." Similarly, an AIDS Healthcare Foundation spokesperson claimed the report showed "exploding drug price increases" and that increases were "not driven by an explosion of prescriptions written by 340B providers."
However, none of these commentators provided data to support their assertions.
Comprehensive Data Analysis Reveals Different Story
The research team performed the first comprehensive analysis comparing the relative contributions of price versus utilization to 340B growth. Their methodology included a decomposition analysis that calculated the contribution of price changes while holding utilization constant, versus utilization changes while holding price constant.
The analysis found that 340B sales growth significantly outpaced non-340B sales in 2023. The 340B growth rate was 2.1 times that of non-340B sales, with 340B sales increasing 15.4% compared to 7.2% for non-340B purchasers. While underlying inflation accounted for 57% of non-340B growth, it represented just 26% of the 340B increase.
Utilization Dominates Across All Drug Categories
The researchers examined specific subsets of drugs to test whether certain categories might show greater price contributions. They analyzed drugs with list price increases exceeding inflation rates and the top 10 340B drugs by discounted purchase prices identified by HRSA in 2023.
Even among drugs with above-inflation price increases, utilization remained the dominant growth driver. For these products, 81.4% of growth was attributable to utilization based on discount price, and 63.6% based on list price. For the top 10 340B drugs, utilization contributed 72.0% and 66.2% of growth at discount and list prices, respectively.
Implications for Payers and Policy
The findings have significant implications for commercial insurers, managed care plans, and employers who pay undiscounted reimbursements to 340B providers for sharply discounted drugs. Critics have long argued that 340B providers engage in profit maximization strategies, particularly targeting specialty medications where 340B profits tend to be substantial.
The data supports concerns that the program has evolved beyond its original intent of helping indigent patients. A previous study by the National Pharmaceutical Council found that participants made the most money off 340B from drugs prescribed in wealthy areas, suggesting the program's benefits may not be reaching the intended vulnerable populations.
Ongoing Legal and Regulatory Challenges
The 340B program faces mounting pressure from multiple directions. Pharmaceutical manufacturers have sought to institute changes following implementation of the Inflation Reduction Act, attempting to shift from a discount program to a rebate system requiring documentation of benefits to vulnerable populations. When CMS declined to allow this change, several major pharmaceutical companies filed lawsuits.
Additionally, West Virginia passed legislation compelling pharmaceutical companies to offer discounts to contract pharmacies filling prescriptions for 340B entities, prompting further litigation with support from community oncology providers who argue the program has forced community providers out of business.
The research provides concrete evidence that challenges the narrative promoted by 340B advocates and suggests that program growth is primarily driven by strategic utilization increases rather than external price pressures from manufacturers. This data-driven analysis offers policymakers and stakeholders a clearer understanding of the factors behind the program's rapid expansion and its implications for healthcare costs.
