Federal 340B Drug Discount Program Saves UC Davis Health $289 Million, Expands Patient Access to Vital Medications
Key Insights
The 340B program saved UC Davis Health (search) $289 million in fiscal year 2024, directly funding free and low-cost medications for thousands of patients.
The program supports safety-net services including subsidized chemotherapy, community health screenings, free preventive care, and a street medicine program for unhoused people.
Pharmaceutical industry groups are lobbying to modify the 340B program, while the American Hospital Association (search) defends it as essential for nonprofit safety-net hospitals.
When Jamie O'Neill, an 82-year-old retired community college English professor in Sacramento, opened his pharmacy bill and found no charge for his diabetes (search) medication, he assumed it was a mistake. For years, the $350 charge for his Jardiance tablets had appeared every few months — a cost so burdensome that O'Neill had at times stopped taking the medication altogether.
"It's outrageously expensive," O'Neill said.
The savings came through UC Davis Health (search)'s outpatient pharmacy, which enrolled him in a federal program that covered the entire cost. O'Neill is one of thousands of UC Davis Health patients — and millions nationwide — benefiting from the 340B drug pricing program, a little-known federal initiative that allows safety-net hospitals to purchase outpatient medications at discounted rates and pass those savings on to patients.
How the 340B Program Functions
Created by Congress in 1992, the 340B program requires pharmaceutical companies to sell outpatient drugs at a discount to safety-net hospitals like UC Davis Medical Center, which serve large populations of uninsured and government-insured patients. These hospitals qualify because they typically operate at a loss when delivering high levels of care to individuals with low incomes.
The savings generated extend well beyond free and low-cost medications. UC Davis Health (search) directs 340B savings toward a broad array of community services, including subsidized chemotherapy and immunotherapy services, community health screenings, personalized pharmacy appointments for patients with serious and chronic medical conditions, critical care ambulance rides for children requiring transport to UC Davis Medical Center from hospitals throughout Northern California, no-cost nicotine therapy for smoking cessation, free preventive care procedures such as colonoscopies and mammograms, and support for a street medicine program that cares for unhoused people.
"The 340B program is not just a financial mechanism — it is a lifeline for our patients and a cornerstone of our mission," said Mike Condrin, interim chief executive officer for UC Davis Health (search). "This program is pivotal in our efforts to provide comprehensive care for a diverse array of challenging conditions. It reinforces our commitment to being a safety-net provider, ensuring that every patient receives the necessary care, irrespective of their financial situation."
In fiscal year 2024, the 340B program saved UC Davis Health (search) $289 million — funds that directly supported patients and the surrounding community.
Patient Impact: Managing Chronic Conditions Without Financial Strain
Patricia Davis, a 61-year-old Sacramento resident born at UC Davis Medical Center, receives free medications for her chronic conditions while living on disability income. She manages high blood pressure, diabetes (search), and a heart condition.
"Because I'm on a fixed income, it's pretty helpful that I don't have a co-pay to pay for my medication," Davis said. "People on a fixed income like SSI, we don't get a lot of money to even pay for a $10 copay for our medication because that's money we can use for groceries — and it's important for us to eat healthy, exercise and not have to worry about where we are going to get the next meal from."
Davis noted that the copay savings allow her to purchase the organic vegetables recommended for her conditions, which she pointed out "are more expensive than a bag of potato chips." She is currently managing her heart condition while awaiting Medi-Cal approval for a stent procedure.
Industry Pushback and Hospital Defense
The pharmaceutical industry has increasingly pushed back against the 340B program, lobbying policymakers and regulators to modify its implementation. Drugmakers allege that 340B is boosting the bottom lines of hospitals and for-profit pharmacies rather than serving vulnerable patients.
The American Hospital Association (search) (AHA) has countered these claims, arguing that drugmakers are spreading misinformation about the program. AHA officials maintain that 340B is functioning as intended: helping nonprofit safety-net hospitals stretch limited resources to expand care for vulnerable populations.
"Drastic changes to the program could jeopardize our ability to offer comprehensive services to those who rely on us," Condrin said. "We are committed to maintaining the integrity of the 340B program to continue supporting the health and well-being of our communities."
"Our involvement in the 340B program is a testament to UC Davis Health (search)'s dedication to advancing health for all," Condrin added.
For patients like Davis, the stakes are personal. "This program is helpful not only for me, but for other patients who qualify, and I think they should keep it that way," she said. "I thank God for having such a beautiful care team that cares about me and my medication."