The 340B Program Reached $66 Billion in 2023—Up 23% vs. 2022: Analyzing the Numbers and HRSA’s Curious Actions

Reality has again failed to support the spin surrounding the 340B Drug Pricing Program.

For 2023, discounted purchases under the 340B program reached a record $66.3 billion—an astounding $12.6 billion (+23.4%) higher than its 2022 counterpart. The gross-to-net difference between list prices and discounted 340B purchases also grew, to $57.8 billion (+$5.5 billion). 340B purchases are now almost 40% larger than Medicaid’s prescription drug purchases.

Hospitals again accounted for 87% of 340B purchases for 2023. Purchases at every 340B covered entity type grew, despite drug prices that grew more slowly than overall inflation.

Lobbyists claim that manufacturers’ 340B contract pharmacy changes are “stripping billions of dollars from the healthcare safety net.” But every year, the data tell a very different story. Only in the U.S. healthcare system can billions more in payments and spreads be considered a cut.

Read on for full details and our analysis, along with fresh details of troubling behavior by the Health Resources and Services Administration (HRSA).

I ♥ DATA

Apexus, the HRSA-designated Prime Vendor, reports purchases under the 340B Drug Pricing Program to HRSA and oversees most aspects of the program’s management. Apexus is owned by Vizient, one the largest hospital group purchasing organizations. (That’s right: The federal government outsources operations of a program that primarily benefits hospitals to an organization owned by hospitals.)

Unlike previous years, HRSA failed to respond to my Freedom of Information Act (FOIA) request and instead simply dropped the data on this public web page: 2023 340B Covered Entity Purchases.

This is progress! Long-time readers know that I have been pestering the agency about these data for many years. I guess HRSA finally got tired of my Freedom of Information Act (FOIA) requests. HRSA still behaved inappropriately, as I explain below.

Here are some other helpful references:

• For a deep dive into the pharmacy and PBM aspects of 340B, see Sections 11.5. and 12.3.5. of our 2024 Economic Report on U.S. Pharmacies and Pharmacy Benefit Managers.

• For information on how pharmaceutical wholesalers benefit from the 340B program, see Sections 3.4.4. and 5.3. of our new 2024-25 Economic Report on Pharmaceutical Wholesalers and Specialty Distributors.

• Hospitals Are Relying More on PBMs to Manage Manufacturers' 340B Contract Pharmacy Restrictions: DCI's 2024 Market Analysis (Our most recent analysis of this controversial element of the program)

340BOOM

The chart below documents the 340B program's skyrocketing growth in drug purchases along with the booming contract pharmacy market. The entire time series of purchases from 2010 through 2023 appears in this LinkedIn post.

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Observations:

• Discounted purchases made under the program totaled at least $66.3 billion in 2023—an increase of 23.4% over the $53.7 billion for 2022. For comparison, CMS projects that discounted purchases of Medicaid prescription drugs will be a mere $48 billion for 2023.

• The compound average growth rate (CAGR) of 340B purchases was 22.2% from 2018 through 2023. Over the same period, manufacturers’ net drug sales (excluding COVID-19 vaccines and therapeutics) grew at an average annual rate of only 4.3%. (See IQVIA's Use of Medicines in the U.S. in 2024.)

• According to IQVIA, the wholesale acquisition cost (WAC) list price value of 340B purchases was $124.1 billion in 2023. (source)

• In 2023, the list-to-340B gap—the difference between purchases at list prices and purchases at 340B discounted prices—grew to $57.8 billion (=$124.1 billion minus $66.3 billion). That’s $5.5 billion higher than the 2022 gap. This difference approximates the money collected by 340B covered entities.

• The gross-to-net bubble—which measures the total value of pharmaceutical manufacturers’ gross-to-net reductions for brand-name drugs—was $334 billion in 2023. (source) Therefore, manufacturers’ discounts under the 340B Drug Pricing Program accounted for about 17% of the total gross-to-net reductions for brand-name drugs.

A quick prebuttal: 340B apologists will claim that the increased purchases reflected manufacturers’ price increases or simply greater utilization. Neither explanation makes sense.

For 2023, changes in brand-name list prices, which approximate changes in the average manufacturer price figures used in the computation of 340B ceiling prices, grew at or more slowly than overall inflation. What‘s more, every credible source shows that the 340B program’s growth has far exceeded the overall market for many, many years. Neither excuse says anything about whether the ever-growing piles of cash are benefiting the right (or any) patients.

Thus, these purported “explanations” are pure spin. Nonetheless, advocates are already trotting out these misleading and nonsensical excuses. It wouldn’t be the first time that 340B lobbyists spread blatant misinformation.

FOLLOW THE 340B DOLLARS

The table below summarizes what happened in 2023. As you can see, hospitals were again the primary beneficiaries of the 340B program, with 87% of total 340B purchases.

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I have long argued that federal grantees, which accounted for only 13% of purchases, are generally the 340B good guys. Consider the findings documented in a recent JAMA Health Forum article: “[U]nlike hospitals, 340B may be associated with enhanced care for key populations that rely on the safety net. Specifically, FQHCs expand care disproportionately to patients who have lower incomes, are served in languages other than English, or are unhoused.”

Hospitals routinely hide behind FQHCs and other grantees whenever someone broaches the topic of modernizing or fixing the 340B program.

HRSA also revealed the top 10 340B drugs, which accounted for one-third of 2023 purchases. Per Brian Reid’s helpful computations, the 340B program accounted for 26% to 55% of manufacturers’ net revenues from these products.

BTW, the Inflation Reduction Act will crush the 340B margin for many of these drugs.

WHAT’S WRONG WITH HRSA?

Despite finally releasing some data on the 340B program, HRSA continues to behave improperly. Consider the following:

• HRSA tries to spin the 340B program’s growth with misleading and irrelevant data. For some reason, HRSA relies on the Center for Medicare & Medicaid Services’ (CMS) national health expenditures data for the following statement as part of its “Key Data on 340B Sales:”

  “Prescription drug spending in the U.S. increased 8.4% to $405.9 billion in 2022, faster than the 6.8% growth in 2021.”

  Alas, the NHE’s outpatient drug spending does not measure total U.S. spending on prescription drugs and therefore does not correspond to the product mix for 340B sales.
  
  That’s because spending on nearly all provider-administered outpatient drugs are reported within the hospital and professional services categories. See the “NOTES FOR NERDS” section of Latest CMS Data Reveal the Truth About U.S. Drug Spending. Per the CBO, about 80% of 340B purchases are for provider-administered outpatient drugs. Whoopsie!
  
  The most charitable interpretation of HRSA’s statement is that the agency doesn’t understand the government’s own drug spending data.

• HRSA hides uncomfortable facts. On February 14, 2024, Chris Hatwig, president of Apexus, reportedly presented data to HRSA that “showed continued program growth.” This activity was described in this February 21, 2024, article from 340B Report.
  
  Naturally, I filed a FOIA requests asking for this material. Five months later, HRSA curtly informed me that it “did not locate any records responsive to your request.” Did Chris Hatwig dream that he had presented to HRSA? Did 340B Report inaccurately record his comments? Hmm.

• HRSA fails to accurately describe the 340B sales data. Data from Apexus include only indirect sales made via wholesalers. The $66.3 billion figure was less than the actual total of 340B purchases at discounted prices. That’s because the Apexus data exclude an unknown amount of manufacturer sales made directly to healthcare institutions as well as some sales by specialty distributors.
  
  For some reason, HRSA omits this fact from its web page.

Economists define regulatory capture as follows:

“Regulatory capture is a process by which regulatory agencies may come to be dominated by the industries or interests they are charged with regulating. The result is that an agency, charged with acting in the public interest, instead acts in ways that benefit incumbent firms in the industry it is supposed to be scrutinizing.” (source)

Unfortunately, that sums up what’s going on. Check out William Sarraille’s excellent takedown of HRSA’s knee-jerk pushback on a 340B rebate model, despite the model’s obvious application to the Inflation Reduction Act.

WHITHER CONGRESS?

There is now overwhelming evidence that many hospitals do not use their billions in 340B funds to boost safety-net engagement. There continues to be a near-total disregard for accountability and transparency, combined with blatant misrepresentations of non-profit hospitals’ responsibilities. The sources are too numerous to mention, but start with DCI’s 2023 letter to Congress and this interview of Professor Sayeh Nikpay.

Over the past year, Congress has started to pay more attention to reforming and modernizing the 340B program. But the program’s size and scale now make it effectively impossible to repair.

As I have pointed out, everyone in the drug channel—hospitals, federal grantees, PBMs, pharmacies, plan sponsors, employers, insurers, wholesalers, technology vendors, consultants, and more—profits from the billions of 340B dollars that are sloshing around the system.

I must reluctantly conclude that the out-of-control expansion will continue.