More pharmaceutical companies look to restrict discounts to 340B hospitals using contract pharmacies


Johnson & Johnson became the 16th drugmaker to limit 340B discounts for hospitals dispensing drugs at contract pharmacies. These manufacturers have taken issue with the proliferation of contract pharmacies in the 340B program, alleging high rates of fraud and duplicative billing. Several court battles between these drug companies and the federal government are ongoing. 

The 340B program, which requires pharmaceutical companies to provide 20 to 50 percent discounts for drugs participating hospitals purchase (see our explainer on the mechanics of the program here), has grown rapidly in recent years.

The Gist: Over 40 percent of hospitals now qualify for 340B discounts, and 340B drug sales totaled $38B in 2020. According to a recent surveyparticipating hospitals have lost 25 to 40 percent of their contract pharmacy savings since drugmakers began restricting discounts in 2020. 

Many hospitals have used savings from the program to subsidize other areas of patient care; some tell us that losing 340B revenue would erase their entire margin. Health systems should plan for a future in which their bottom lines are not dependent on this increasingly at-risk revenue source. 

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