Report finds 78% of all 340B benefits go to large wealthy nonprofit hospitals

WASHINGTON — A new analysis from the Institute for Health Policy Accountability (IHPA) details how some of the wealthiest nonprofit hospital systems in America are raking in billions of dollars in profits from a federal drug discount program designed to help low-income and underserved patients.

The report, “Wealthy Nonprofit Hospitals Dominate Federal Program for the Poor,” finds that between 70 and 80 percent of the benefits from the federal 340B Drug Discount Program now flow to large, well-funded nonprofit hospital networks — contrary to the program’s original intent.

Created by Congress in 1992, the 340B program was meant to lower prescription drug costs for nonprofit hospitals that serve low-income and vulnerable communities. Instead, new research shows the program has been exploited by major health systems that generate billions in annual revenue.

Key findings from the IHPA report include:

• Since 2010, 340B drug purchases have increased by 905%, growing from $6.6 billion to $66.3 billion in 2023 — even as the number of Americans living in poverty declined by 21%.
• 78% of all 340B benefits now go to large nonprofit hospitals, while only a fraction reach community health centers and clinics that directly serve low-income patients.
• Nonprofit hospitals are buying drugs at deep discounts but charging insurers the full list price, a practice known as “spread pricing,” pocketing the difference as profit.
• Wealthy nonprofit hospitals often operate 340B facilities in affluent neighborhoods, far from the low-income areas the program was designed to serve.
• The program’s structure incentivizes the use of higher-priced, brand-name drugs over generics, contributing to rising drug costs for all patients.

The analysis profiles several major hospital systems, including Northside Hospital (GA), Baptist Health (KY), Wellstar (GA), and the University of Kansas Health System, each of which reported billions in annual operating revenue while benefiting from the 340B program.

Read the full report here.

This report follows a Senate HELP Committee hearing, where Republican Senators voiced their frustrations with the program. 

“Anyone who says that 340B is cost neutral to taxpayers is not paying attention,” Committee Chair Sen. Bill Cassidy, R-La., said at the hearing. “As the 340B program grows, so have healthcare costs. 340B should be about making drugs more affordable. It should not be a line item on an investor call.” 

According to a recent CBO analysis, hospitals across the U.S. have exploited the 340B Drug Pricing Program, resulting in significant waste, fraud, and abuse. The report found that the program “encourages behaviors that increase federal spending and raise prices for American taxpayers.”

The Institute for Health Policy Accountability is an independent authority on key drivers of decision making in the health care space. IHPA provides fact-based research and analysis across the public policy landscape, adding a central and currently missing voice to the conversation.

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