Why 340B matters to Californians and their health

OPINION – When used as intended, the federal 340B program can combat deep systemic inequities and improve health outcomes for marginalized communities; however, it is being exploited by bad actors and Californians aren’t benefiting.

Originally passed into federal law in 1992 to help safety net clinics and nonprofit hospitals keep their doors open by purchasing prescription medications at heavily discounted rates, the 340B program has ballooned into a cash cow for large corporations, such as for-profit hospitals, pharmacy benefit managers (PBMs) and private health systems, particularly in California. Instead of using 340B savings to better address their patients’ needs (i.e. free or discounted prescriptions, wraparound care, mobile health screenings, etc.), private care systems have exploited the program to pad their bottom lines while still aggressively going after patients for medical debt.

It’s shocking to me, as a public health scientist who relies heavily on data and evidence-based practices to understand and address health issues, that efforts to improve transparency and accountability within the 340B program have stalled despite dozens of reports, investigations, and exposés finding that certain participating entities leverage the lack of oversight to exploit the low-income communities they serve and funnel money toward more affluent communities.

Even if a patient can access the care they need when they go to a 340B clinic or hospital, it doesn’t always mean they can fill their medication at the end of an appointment. Contract pharmacies, a tool 340B facilities use when they don’t have an in-house pharmacy, are rarely located within the same zip code of the facility, nor do they fill patients’ prescriptions at the reduced 340B price.

While expanding the use of contract pharmacies may have been created with good intentions to help increase access for patients, improve health outcomes, and rectify systemic inequities, it is rife with unintended consequences and is in desperate need of reform. A report from the American Journal of Managed Care found that hospitals and 340B grantees use contract pharmacies to generate income, and “generally do not appear to contract with pharmacies located in neighborhoods where low-income patients are likeliest to live.”

Unfortunately, instead of addressing the abuse of the program to ensure contract pharmacies actually increase access for those in need, it looks like California may codify the corrupt patterns of 340B growth and expansion that continue to negatively impact patients.

AB 1460, introduced by Assemblymember Chris Rogers (D-Healdsburg), would allow for the unlimited use of contract pharmacies with no accountability, oversight, or transparency metrics. Instead of requiring contract pharmacies to report revenue and demonstrate how 340B savings are shared with their patients (like federally qualified health centers, rural health clinics, hemophilia treatment centers, and HIV clinics must do), AB 1460 essentially gives large corporations, private health systems, and PBMs even more flexibility to profit off the backs of marginalized Californians.

By amending AB 1460 to first look at transparency and then look at accountability metrics, similar to what is being requested at the federal level, we would be able to determine how entities are using 340B to reinvest into the communities they serve, support ancillary services, and increase access to care for vulnerable patients. For example, these metrics could require that funds derived from 340B are not used on administrative salaries unless those salaries are directly tied to patient care systems.

This federal program holds exponential promise to help our most vulnerable communities access affordable health care, but we all lose if the program stays in its current form or is expanded without measurable transparency and accountability metrics.

Without oversight, for-profit corporations, PBMs, and large hospital systems will continue to exacerbate health disparities for marginalized communities by increasing costs, reducing patient access, and driving vertical consolidation without any tangible benefits for patients.

Already, contract pharmacies within Black and Latino neighborhoods are declining, while growth is being concentrated in wealthier and whiter neighborhoods. And, more than half of 340B profits retained by contract pharmacies are concentrated in four companies: Walgreens, Walmart, CVS, and Accredo (owned by Express Scripts, which is owned by Cigna).

We need the 340B program to work as intended, so individuals who are underinsured or uninsured can access the care they need without fear of how they’re going to pay for it. Rather than expanding an abused federal program through AB 1460, legislators could improve patient access and care by closing loopholes and requiring 340B entities to reinvest dollars back to patients as intended, so that Californians have the resources and programs they need and deserve to not just survive, but thrive.

Ifeoma Udoh, PhD is the Executive Vice President for Policy Advocacy and Science, for the Black Women’s Health Imperative.