Most of the $50 billion gap, or profit, goes to hospitals, which have scored a windfall. At list prices, those drugs last year would cost $94 billion. Drug purchases under 340B in 2021 totaled $44 billion, up from $12 billion in 2015. The number of 340B hospitals, clinics, and other eligible sites has gone from 8,000 in 2000 to more than 50,000 today, and 340B has become “unambiguously the second-largest government pharmaceutical program, based on net drug spending” after Medicare’s drug benefit, writes Adam Fein of Drug Channels, a leading expert on 340B. Techniques like this have been repeated around the country, and the program has exploded.

Meanwhile, the Times reported, as a way to “supercharge the program,” Bon Secours Mercy Health, the large non-profit chain that owns Richmond Community, has been building “clinics in wealthier neighborhoods, where patients with generous private insurance could receive expensive drugs.” On paper, Bon Secours made “the clinics extensions of poor hospitals to take advantage of 340B.” The hospital then “charges the private insurer Blue Cross Blue Shield more than seven times that price - $25,425.”

A 340B hospital, Richmond (Va.) Community, buys a vial of the medicine for $3,444. In a recent article, the New York Times used the example of Keytruda, a cancer drug. Hospital profits under 340B are enormous. The hospital uses the profit - the difference between the two amounts - to assist patients through, for example, “uncompensated care,” that is, free care for people who don’t have insurance or can’t afford to pay. The hospital then bills insurers for the full list price. A hospital in a poor community gets massive discounts from drug manufacturers on the purchase of advanced medicines for out-patients. The Supreme Court in June struck down, on technical grounds, an attempt to reduce costs. Costs have quadrupled since 2015, and impoverished patients aren’t being served. The idea behind 340B was to transfer money from drug companies to hospitals, which would use the funds to help low-income, mostly uninsured patients in their neighborhoods. Most of the time, the harm is minor, but not with the notorious 340B, the section of the Public Health Services Act that created the program.

Like side effects from medicines, unintended consequences are adverse results that legislators don’t anticipate when they pass laws. This year marks the 30th anniversary of a federal hospital program that will go down in the history of public policy as the best example of unintended consequences run wild.

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