Will all hospitals soon have to report their 340B revenue?

In an unprecedented move, hospitals in Minnesota were recently compelled to publicly report their revenue from the 340B discount drug program. A prominent researcher believes it will spread to other states.

Minnesota 340B providers earned a net $630 million in revenue from the program in 2023, according to a recently released first-in-the-nation report required by a 2023 state law. And that total was described by the state report as “a significant underestimate” of 340B revenue, since it excludes office administered drugs—which a new state law will require providers to report in 2025.

The report also found:

• 80% of net revenue was earned by Disproportionate Share Hospitals (DSH)
• Large difference in net revenue among DSH hospitals but not other hospitals
• $120 million (16% of revenue) in total provider external operational expenses
• 10 hospitals had no net 340B revenue or operated their 340B programs at a net loss
• 54% of 340B net revenue came from commercial payers
• 17 drug families – 6% of fills — provided nearly 70% of net 340B revenue

Seen as significant

Sayeh Nikpay, associate professor at the University of Minnesota School of Public Health, has long studied the 340B program. But she was surprised by the large share of 340B revenue — 16% — that went to administrative costs, which included contract pharmacies and third-party administrators.

“Most of those fees are going to big pharmacy chains,” she said. “So, you have to wonder, is that a party that the original architects of this policy really wanted or intended.”  

It was noteworthy to Nikpay that the data showed for some hospitals and many federal grantees 340B revenue only was able to reduce operating losses and not generate large returns.

“So, the 340B program is helpful but they never come out of the red because they’re really about reducing operating losses,” Nikpay said.

Driving more transparency

The new report may fuel interest among other policymakers in 340B transparency.

“The reason 340B is on the horizon is we have clear interest at the federal level,” Nikpay said about two federal bills requiring 340B provider reporting. “Maybe it won’t go anywhere because it is difficult to pass federal policies. But we do have states that are motivated to do it.”

Although neither federal bill has advanced much in the current Congress, 340B provider reporting has advanced in some states.

Maine also has enacted a 340B provider reporting law, which has not yet gone into effect. California votes also adopted a proposition in 2024 that could require reporting by 340B covered entities.

“I wouldn’t be surprised if 340B becomes—across different states—part of normal reporting that gets done because it is such an important source of support for hospitals,” Nikpay said.

Nikpay said the report has garnered interest from legislators in additional states, who are looking to address the program, as well.

“Policymakers are quite interested in these results, so hospitals should be ready to start talking about them,” Nikpay said.

Hospitals respond

The American Hospital Association’s pushback on federal transparency legislation included criticism that one bill’s “singular focus on charity care reveals the misguided belief that the provision of charity care is the only way 340B hospitals can demonstrate their commitment to the patients they serve.”

Nikpay agreed that examining the benefit of the 340B program solely through the lens of charity care “is a little bit limited.”

Instead, any examination of how hospitals use 340B revenue would need to include total uncompensated care, as well as the amount spent on unprofitable service lines, such as burn units, that benefit their local community. She anticipated coming research will compare 340B revenue to such benefits provided by hospitals.

The AHA also highlights that 340B hospitals already report a variety of information on the care they provide to underserved populations, including tax documents showing they provided nearly $84.4 billion in community benefits in 2020.

The AHA also has established the 340B Good Stewardship Principles, which asks 340B hospitals to voluntarily publicly disclose their 340B savings and how those savings are used to benefit their communities.

Trump actions

The Minnesota report also may fuel the incoming Trump administration’s interest in pushing 340B policy changes.

“The previous Trump administration had a taste for 340B-related reform and we may see more of that to come,” Nikpay said.

Those policies included a reduction in Medicare payments for 340B drugs from the average sales price (ASP) plus 6% to ASP minus 22.5%. The Supreme Court struck down that cut, based on procedural missteps and required repayment of $9 billion for five years of cuts. However, the court identified the process the administration would need to follow to try the cuts again in a way that would withstand legal scrutiny.

The Minnesota report demonstrated how significant such a cut could be for 340B hospitals. It found Medicare provided 31% of the net revenue for 340B covered entities.

Nationally, a reintroduction of the first Trump administration’s 340B Medicare cuts would reduce Medicare spending by $73.5 billion over 10 years, according to new projection by the Congressional Budget Office.