The new second term Trump Administration, barely a month old, has stirred controversy through a lightning-fast review of federal spending, in some cases attempting to freeze trillions of dollars in already-appropriated federal grants and in other cases seeking to "delete" entire federal agencies that Congress had established by statute. Judicial review of legal challenges to these actions—which, so far, have yet to reduce actual federal spending—has enjoined many of them, at least temporarily.
But if Elon Musk's Department of Government Efficiency (DOGE), President Trump, and the new Secretary of Health and Human Services wish to save federal taxpayers money, they could work "extremely hardcore" to expand the scope of the 340B drug discount statute—and, by extension, the work of the health centers, hospitals, and other federal grantees that benefit from it.
The 340B federal drug discount statute, 42 U.S.C. § 256b, saves American taxpayers billions of dollars each year—by some estimates, over $40 billion in direct costs alone. It's a tremendous bargain considering that the taxpayer cost for 340B amounts to just $12 million annually for the budget to operate HRSA's Office of Pharmacy Affairs (OPA), which superintends the 340B statute.
The 340B statute requires that drug manufacturers that wish to sell a drug to state Medicaid recipients must agree to offer a discounted "ceiling price" for purchases of that drug to specified nonprofit safety net providers, including federally qualified health centers (FQHCs), Ryan White clinics, hospitals serving disproportionate shares of Medicaid patients (DSH), and others. Not all manufacturers agree to sell to Medicaid under this condition, and not for all drugs; but many do.
The safety net providers who participate in 340B benefit in two ways. First, they lower their up-front costs for purchasing drugs to dispense to their patients; and second, if the patient receiving the drug has third-party insurance that reimburses for the drug at an amount greater than the purchase price, the safety net provider receives a financial benefit that it can reinvest in its nonprofit mission to treat vulnerable patient populations. As Congress, the courts, and HRSA have observed, the 340B statute "enables covered entities to stretch scarce federal resources as far as possible, reaching more eligible patients and providing more comprehensive services." In short, 340B enables safety net providers to serve more patients without imposing additional costs on taxpayers.
Just how much 340B saves American taxpayers is somewhat uncertain because manufacturers jealously guard their pricing data, but one can obtain some rough estimates. For 2022, HRSA's data indicated that 340B purchases accounted for $53.7 billion. Data from PhRMA, the manufacturers' trade association, claimed that 340B purchases exceeded $100 billion in 2022 "when 340B-priced medicines are measured at wholesale acquisition cost [WAC]" rather than at the discounted 340B purchase price. Stated another way: 340B discounts to nonprofit safety net providers reduced the purchase price of those drugs by roughly 46% overall, or $46 billion, in one year alone. When including the additional financial benefit safety net providers reinvest in patient care from the subset of 340B purchases covered by third-party insurance, the savings realized from costs taxpayers would otherwise cover for healthcare for their fellow citizens only increase. And as HHS's data confirms, the prices for prescription drugs continue to increase above the rate of inflation—by 8.4% in 2022, which itself was faster than the 6.8% increase in 2021. The new Administration has already stated publicly that "[l]owering the cost of prescription drugs for Americans is a top priority of President Trump and his Administration." Expanding the scope of 340B—and the work of nonprofit safety net providers that depend on 340B to provide services at little to no taxpayer cost—would be a great start.
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