The 340B Divide: How a Program Meant to Help Independents Is Now Fueling Chain Dominance
A staggering $90 billion in drugs flowed through the 340B program in 2022, but the original intent of this vital program – supporting access to affordable medications for vulnerable populations via independent pharmacies – is rapidly eroding. Instead, the landscape is shifting dramatically, with large pharmacy chains and mail-order services capturing the vast majority of 340B revenue, leaving independent pharmacies struggling to compete and raising concerns about prescribing incentives.
The Evolution of 340B: From Local Access to National Networks
The 340B program, established in 1992, initially envisioned a network of independent pharmacies strategically located near hospitals and community health centers. These pharmacies would serve as crucial access points for patients, offering discounted drugs purchased through the program. As Shawn Gremminger, president and CEO of the National Alliance of Healthcare Purchaser Coalitions, explained in a recent interview with Pharmacy Times, the original model allowed each covered entity to have just one contract pharmacy. This fostered close relationships and ensured local access.
However, that structure has undergone a significant transformation. The removal of the single-contract pharmacy limitation in the last decade has opened the floodgates for large chains like CVS and Walgreens to dominate the 340B space. Covered entities now overwhelmingly favor contracting with these established networks for ease and volume. This shift has effectively excluded many independent pharmacies from participating in the lucrative 340B market, creating a two-tiered system.
The Rise of Mail-Order and Its Impact
Adding to the challenge for independents is the growing trend of 340B drugs being dispensed through mail-order pharmacies. Independent pharmacies typically lack the infrastructure and logistical capabilities to compete effectively in this segment, further exacerbating the competitive disadvantage. This trend is particularly concerning as mail-order often prioritizes cost savings over personalized patient care.
The “Buy Low, Sell High” Dynamic and Market Distortion
At the heart of the issue lies the 340B program’s fundamental “buy low, sell high” model. Covered entities – hospitals, health systems, and community health centers – purchase drugs at significantly discounted rates and then resell them to commercial payers at substantially higher prices. This price differential generates substantial profits, shared between the covered entity and the contract pharmacy.
While this model benefits those within the 340B ecosystem, it creates significant distortions in the broader drug market. Independent pharmacies, and those not affiliated with Pharmacy Benefit Managers (PBMs), are often reimbursed at rates that don’t cover their costs, leading to financial strain and potential closures. As Gremminger points out, a clear divide is emerging: those *in* 340B are generally thriving, while those *outside* are struggling.
Prescribing Incentives and Patient Care Concerns
Perhaps the most troubling aspect of the 340B program’s evolution is the potential impact on patient care. The financial incentives associated with 340B drugs can inadvertently encourage prescribers to favor higher-priced medications, even when equally effective, lower-cost alternatives are available. Pharmacists, uniquely positioned to understand drug pricing, often find themselves in a difficult ethical situation, dispensing medications they know may not be the most cost-effective option for the patient.
Data supports these concerns. Studies have shown that patients receiving care at 340B-covered entities are more likely to be prescribed higher-priced drugs and a greater number of medications overall. Health Affairs recently published research detailing these trends, highlighting the need for greater transparency and oversight.
The Pharmacist’s Dilemma
Pharmacists are often the last line of defense in ensuring appropriate medication use. However, the 340B incentives can create a conflict of interest, potentially undermining their ability to advocate for the most affordable and effective treatment options. This situation demands a broader conversation about the ethical responsibilities of all stakeholders within the 340B program.
Looking Ahead: Potential Solutions and Future Trends
The future of the 340B program hinges on addressing these critical imbalances. Potential solutions include stricter oversight of contract pharmacy networks, increased transparency in drug pricing, and reforms to incentivize value-based care rather than volume-based prescribing. Greater emphasis on independent pharmacy participation, perhaps through targeted grants or preferential contracting policies, could also help restore the program’s original intent.
We can also anticipate increased scrutiny from policymakers and payers as they seek to control rising healthcare costs. The current 340B structure is increasingly viewed as a contributor to these costs, and reforms are likely to be considered in the coming years. The long-term sustainability of the program depends on its ability to adapt to these changing dynamics and prioritize patient access to affordable, effective medications.
What steps can be taken to ensure the 340B program truly serves its intended purpose? Share your thoughts in the comments below!
