Last week, the Congressional Budget Office (CBO) released a new report outlining the growth of the 340B program over the past decade, covering data from 2010–2021. At first glance, the findings felt somewhat dated since there is evidence that shows the program has continued to expand to over $66 billion in 2023, according to Drug Channels and other sources.
Looking more closely, however, one section stood out: The 340B Drug Pricing Program and the Federal Budget. Here, the CBO suggests that the 340B program increases overall federal spending. This is the first time in recent years I’ve seen specific reasons outlined to link federal spending directly to 340B.
That’s notable, because a core group of 340B supporters (including us) has long anchored on the argument that the program does not rely on taxpayer dollars. Instead, the cost of the drug discount is borne by pharmaceutical manufacturers.
I’ll be the first to acknowledge that this may not be true across every Covered Entity type, disease state, or patient population. But in the market segment we serve at Alchemy which includes federal grantees, namely FQHCs, STD clinics, and Ryan White grantees—there is little evidence to suggest that 340B has meaningfully increased federal spending.
With that in mind, I thought it would be useful to walk through the CBO’s key points and examine them through the lens of an HIV patient, specifically, an untested patient brought into care through an STD clinic.
Prescribing of More Drugs and More Expensive Drugs
CBO’s report argues that because 340B facilities generate net revenue when they dispense drugs purchased through the program, those facilities have an incentive to prescribe more drugs and to shift prescriptions to those with larger spreads between the insurance rate and the 340B price.
From an HIV patient’s perspective, this argument doesn’t hold. There are only a small number of FDA-approved antiretroviral therapies (ARTs) to treat HIV, and all of them are expensive. There are no generic or lower-cost substitutes. In this context, there’s no incentive to prescribe a “more expensive” drug because it’s simply not an option.
Expanded Care Services
CBO also notes that participating facilities may use net revenue from the 340B program to offer new types of services, some of which require prescribing drugs. If those services are covered by federal or commercial insurance plans, the federal deficit increases.
But let’s consider the alternative. If an HIV patient is not identified and treated early, they risk progressing to late-stage AIDS with a severely compromised immune system and multiple organ failures from uncontrolled infections. The cost of treating such a patient in the ER and managing long-term complications would almost certainly be much higher for Medicaid, and therefore for the federal budget.
In other words, expanded 340B-funded services such as outreach, linkage to care, or transportation are cost-saving in the long run.
Reduced Rebates for Medicare and Medicaid
CBO highlights another issue that Medicaid spending increases when beneficiaries receive drugs purchased through 340B because rebates aren’t collected.
For CBO’s point to hold, you’d need to assume that Medicaid patients receiving HIV care at a 340B clinic were already being treated at a non-340B provider (where rebates would apply). The reality is often the opposite. Patients are first diagnosed and brought into care at 340B entities like STD clinics or Ryan White grantees. Without these programs, many of those patients might never access treatment until their health declines significantly. And again, the cost of late-stage AIDS treatment is far greater than the “lost” rebate.
Lower Reimbursement Rates for 340B Drugs
CBO also suggests that because 340B facilities generate net revenues, they may accept lower reimbursement rates. If Medicare or Medicaid pay lower rates, federal spending decreases.
While that’s theoretically true, the practical implications are dangerous and shortsighted. If Medicare or Medicaid lower reimbursement rates, commercial insurers are likely to follow. That would hand even more leverage to PBMs in the drug pricing chain. And let’s be honest, no one wants that!
More importantly, this would undermine the very purpose of 340B. The program’s mechanics depend on the “spread” between the insurer’s reimbursement and the facility’s acquisition cost. If reimbursement rates are cut, the financial engine of the program weakens, threatening patient services and access.
Several states have already enacted anti-discrimination laws to prevent PBMs from targeting 340B providers for this very reason. In our own work implementing in-house pharmacies across the country, we’ve seen PBMs increasingly probe for 340B-specific details which likely is a precursor to discriminatory reimbursement practices. It’s a concerning trend we’ll continue to monitor closely.
The CBO report raises important questions, but many of its conclusions don’t reflect the realities of HIV care on the ground. For patients, particularly those diagnosed and linked to care through safety-net providers, the 340B program is not an expansion of federal spending—it’s a lifeline that prevents far higher costs down the road.
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