Rising 340B Costs Drive Employer Spending and Spark Calls for Reform

In an interview with Pharmacy Times®, Shawn Gremminger, president and CEO of the National Alliance of Healthcare Purchaser Coalitions, explained how employers often lose out on negotiated rebates when drugs are filled through the 340B program, forcing them to pay inflated list prices. Continuing from his previous discussions, he noted that as 340B has expanded from $10 billion to $70 billion, employers now face about $6 billion in additional annual costs. This increased spending raises premiums, cost-sharing, and out-of-pocket expenses for employees and their families. Gremminger emphasized the need for reform to ensure the program benefits underserved communities instead of burdening working families.

Pharmacy Times: How do the cost-driving dynamics of 340B, including higher hospital prices, affect employer pharmacy benefits and "lost rebates"?

Shawn Gremminger: As I think most of your audience knows, in the commercial market we, as employers and purchasers, have a contract with a pharmacy benefit manager (PBM). We have our real drives with PBMs, and in fact, we've been strongly supportive of federal legislation to substantially reform the PBM market.

At the very least, PBMs are negotiating discounts and rebates. Some—though not all—of those negotiated lower prices or rebates are flowing back to us, and there is data to suggest that is the case. So, while it's an imperfect market, at the very least we are paying a discounted price based on a post-rebate amount when a drug is filled through the 340B system and not through traditional sourcing.

Most of the time, we are not receiving those rebates. In fact, every PBM contract I’ve ever seen between a PBM and an employer states, “We will not offer you rebates on a 340B drug.” So, if the PBM determines that a drug was filled through 340B, the employer is no longer paying the discounted amount agreed upon with the PBM. Instead, it is paying the list price—which, as we all know, is an absurd number, often several times higher than the discounted amount and certainly well above what could be considered reasonable.

As 340B has grown from a small program generating about $10 billion in revenue with little commercial exposure to now $70 billion and growing, increasing numbers of employees in the commercial market are filling their drugs through 340B. Their employers are paying full price for those drugs.

The net impact on employers, just from that one aspect, is about $6 billion in additional spending per year, based on 2023 data. As the program grows, the number has likely increased. This is a substantial amount of money, and the rise in spending by health plans and employers has a trickle-down effect on employees and their families. It means higher premiums, higher cost sharing, and higher out-of-pocket costs—all going to covered entities that have no accountability for what they are doing or what they are expected to do within 340B.

Pharmacy Times: Is there anything you would like to add?

Gremminger: There are a lot of distortions in 340B, and many people are impacted by this program. Unfortunately, there has been misuse and rampant growth in the program.

Obviously, drug makers would like to reform 340B. But we have been very clear that reform needs to happen from the perspective of employers and purchasers. Independent payers—such as health insurance carriers not affiliated with PBMs—tend to support 340B. We are really hoping that pharmacists will come along with us on this journey.

We know some pharmacists work for 340B covered entities or contract pharmacies, and they will defend the program. I would say they are complicit in being involved in a program that is actively harming working families. But for anyone not making a significant amount of money from 340B, now is the time to stand up and say, "We need real reform."

In the end, it is underserved communities—who aren’t getting the help they need—and working families—who are paying more—that are really suffering. We hope the pharmacy community can join us in pushing for reform to make this program actually work for the communities it was meant to serve.