Minnesota just released the industry‘s first ever mandated financial report on the 340B Drug Pricing Program. Below, I do a wicked deep dive into the data and highlight crucial implications about spending, profits, pharmacies, plans, patients, program integrity, and more.
There are important limitations to these data. But Minnesota’s report marks a valuable first step on the yellow brick road to the wonderful world of transparency. I suspect similar reports are gonna be popular.
And don't forget to put on your ruby slippers and hear from Doctor of Thinkology Adam J. Fein. During next week’s Drug Channels Outlook 2025 live video webinar, he'll tell you what's ahead for the program that continues to defy gravity.
I’LL GET YOU, 340B DATA, AND YOUR LITTLE DOG, TOO!
As always, I encourage you to review the Minnesota Department of Health’s original report: 340B Covered Entity Report.
This report was the result of a 2023 Minnesota law requiring 340B covered entities to report information about costs, revenues, and other aspects of the program. In 2024, the law was amended to ensure that covered entities reported revenues from provider-administered drugs. Pages 11 to 15 of the report provide useful background on the legislative requirements and data quality.
Note that the data I discuss below include only pharmacy-dispensed prescriptions. Apparently, the original 2023 law was worded ambiguously, so covered entities didn’t report any data about provider-administered drugs. (See page 40 of the report.) The 2024 amendment fixed this problem, so the November 2025 report will be more complete.
FYI, only two other states—Maine and Washington—require any type of 340B reporting. And we all know that Health Resources and Services Administration (HRSA) only reluctantly provides any data on the 340B program.
Here are some 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)
- The 340B Program Reached $66 Billion in 2023—Up 23% vs. 2022: Analyzing the Numbers and HRSA’s Curious Actions (DCI’s analysis of the latest public data on the program and its participants)
Below is DCI’s summary of the key financial data from the report. The information above each column explains our computations.
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Here are four striking revelations from the Minnesota report:
1. Hospitals in Minnesota were the primary beneficiaries of the 340B program.
Minnesota hospitals were the primary beneficiaries of the 340B program. Disproportionate share hospitals accounted for more than three-quarters (77%) of total 340B purchases of pharmacy-dispensed prescriptions. Since the Minnesota figures include only pharmacy-dispensed prescriptions, they are not directly comparable to the national numbers published by HRSA.
Unfortunately, the Minnesota Department of Health has zero transparency into how Minnesota hospitals use their billions in 340B funds, beyond any required non-profit community benefit obligations. The report even highlights such program shortcomings as the "lack of program transparency," "mixed evidence on whether 340B benefits patients directly," and "drug affordability problems for patients."
Unfortunately, the Minnesota Department of Health has zero transparency into how Minnesota hospitals use their billions in 340B funds, beyond any required non-profit community benefit obligations. The report even highlights such program shortcomings as the "lack of program transparency," "mixed evidence on whether 340B benefits patients directly," and "drug affordability problems for patients."
2. For-profit contract pharmacies and TPAs absorbed at least 16% of covered entities’ 340B profits.
Covered entities can profit from prescriptions filled by an external contract pharmacy that is not owned or operated by the covered entity. It does this after the patient has paid their out-of-pocket cost and the Medicare Part D or commercial health plan has adjudicated and paid the prescription.
You know we’re not in Kansas anymore when a report highlights data on the payments to two types of external entities:
In other words, more than $1 in $6 in 340B profits went to for-profit entities. The 340B program has always been green.
The Minnesota law does not require covered entities to share data on costs for contract pharmacies and/or TPAs. Most (88%) disproportionate share hospitals reported costs for contract pharmacies and/or TPAs. However, only 21% of disease-specific federal grantees and 68% of safety-net federal grantees reported these costs. What’s more, covered entities used inconsistent methodologies to report contract pharmacy fees.
If covered entities chose not to report the data, then the figures underestimate the true costs. If they had no such expenses because in-house pharmacies fulfilled the prescriptions, then the figures will have overestimated the true costs. Perhaps we’ll learn more from the 2025 report. But based on publicly available contracts and the prevalence of contract pharmacies, the figures seem likely to be lower than reality.
The report also failed to distinguish between prescriptions dispensed by in-house pharmacies vs. external contract pharmacies.
Consequently, I view the 16% figure as the lower bound of what was actually paid.
You know we’re not in Kansas anymore when a report highlights data on the payments to two types of external entities:
- Contract pharmacies, which earn per-prescription fees paid by the 340B entity. The superior profitability of a 340B prescription lets hospitals offer generous pharmacy fees and share a percentage of the 340B savings with the contract pharmacy. See our most recent market analysis for data on the largest contract pharmacy players.
- Third-party administrators (TPAs), which enable relationships between covered entities and their contract pharmacies. We profile TPAs in Section 11.5.4. of our pharmacy/PBM report.
In other words, more than $1 in $6 in 340B profits went to for-profit entities. The 340B program has always been green.
The Minnesota law does not require covered entities to share data on costs for contract pharmacies and/or TPAs. Most (88%) disproportionate share hospitals reported costs for contract pharmacies and/or TPAs. However, only 21% of disease-specific federal grantees and 68% of safety-net federal grantees reported these costs. What’s more, covered entities used inconsistent methodologies to report contract pharmacy fees.
If covered entities chose not to report the data, then the figures underestimate the true costs. If they had no such expenses because in-house pharmacies fulfilled the prescriptions, then the figures will have overestimated the true costs. Perhaps we’ll learn more from the 2025 report. But based on publicly available contracts and the prevalence of contract pharmacies, the figures seem likely to be lower than reality.
The report also failed to distinguish between prescriptions dispensed by in-house pharmacies vs. external contract pharmacies.
Consequently, I view the 16% figure as the lower bound of what was actually paid.
3. Commercial payers and Medicare Part D plans—and patients—fund 85% of 340B revenues in Minnesota.
Here’s a dirty secret about the 340B program: Commercial payers and Medicare Part D fund the 340B program’s savings.
That’s because 340B prescriptions at contract pharmacies cannot be identified at the time of adjudication. The program only works if a third-party payer reimburses prescriptions at full price. Consequently, the third-party payer is responsible for the balance of the profit earned by the 340B hospital and the contract pharmacy.
As the report’s Appendix 7 shows, Minnesota’s top prescriptions include many leading specialty drugs, most of which have 340B discounts of 50% or more. After contract pharmacy and TPA expenses, a Humira prescription generated $3,405 for a covered entity, while an Enbrel prescription generated $6,747.
Plans may also lose the value of rebates on these prescriptions. That’s because PBMs may exclude 340B prescriptions from rebate eligibility.
Patients covered by commercial insurance and Medicare Part D are also funding 340B profits. Consider a patient taking a specialty drug with out-of-pocket costs tied to coinsurance or within the deductible phase. The patient would pay full price—or a percentage of full price—for a prescription that the 340B covered entity bought at half price (or less). An insured patient could pay thousands of dollars out of pocket—even as the 340B hospital and its contract pharmacy generate substantial profits from that prescription.
The list price of Enbrel is about $7,900. Imagine being a patient who paid a $1,500 coinsurance for your Enbrel prescription, while your plan paid more than $6,000. Then you and your plan find out that the hospital bought the drug for $0.01 and paid a PBM-owned pharmacy and a venture-capital-backed TPA more than $1,000 to facilitate the transaction. True magic.
If you’re skeptical, I walk through the math in this video: Follow the 340B Prescription Dollar: How PBMs Profit from 340B Contract Pharmacies. (The example starts around the 8:06 mark.)
That’s because 340B prescriptions at contract pharmacies cannot be identified at the time of adjudication. The program only works if a third-party payer reimburses prescriptions at full price. Consequently, the third-party payer is responsible for the balance of the profit earned by the 340B hospital and the contract pharmacy.
As the report’s Appendix 7 shows, Minnesota’s top prescriptions include many leading specialty drugs, most of which have 340B discounts of 50% or more. After contract pharmacy and TPA expenses, a Humira prescription generated $3,405 for a covered entity, while an Enbrel prescription generated $6,747.
Plans may also lose the value of rebates on these prescriptions. That’s because PBMs may exclude 340B prescriptions from rebate eligibility.
Patients covered by commercial insurance and Medicare Part D are also funding 340B profits. Consider a patient taking a specialty drug with out-of-pocket costs tied to coinsurance or within the deductible phase. The patient would pay full price—or a percentage of full price—for a prescription that the 340B covered entity bought at half price (or less). An insured patient could pay thousands of dollars out of pocket—even as the 340B hospital and its contract pharmacy generate substantial profits from that prescription.
The list price of Enbrel is about $7,900. Imagine being a patient who paid a $1,500 coinsurance for your Enbrel prescription, while your plan paid more than $6,000. Then you and your plan find out that the hospital bought the drug for $0.01 and paid a PBM-owned pharmacy and a venture-capital-backed TPA more than $1,000 to facilitate the transaction. True magic.
If you’re skeptical, I walk through the math in this video: Follow the 340B Prescription Dollar: How PBMs Profit from 340B Contract Pharmacies. (The example starts around the 8:06 mark.)
4. Minnesota faces significant risks for duplicate discounts in Medicaid and Medicare.
Table 3 (reproduced below) shows that 20% of prescription claims (“drug fills”) and 14% of net 340B revenue came from Medicaid and MinnesotaCare. For reporting purposes, these are grouped as Minnesota Health Care Programs (MHCP).
However, the 340B statute prohibits manufacturers from having to provide a discounted 340B price and a Medicaid drug rebate for the same drug. The prohibition on duplicate discounts applies to traditional Medicaid arrangements as well as Medicaid programs operated by managed care organizations, a.k.a. Managed Medicaid.
Minnesota’s 340B web page outlines the procedures by which covered entities can prevent duplicate discounts. The page states: “Covered entities must have procedures in place to prevent duplicate discounts.”
Do they?
I couldn’t find any information on how or if Minnesota determines whether a covered entity is a good witch or a bad witch. I also couldn’t locate any public audit records.
It’s also not clear if manufacturers can audit compliance. One of the Government Accountability Office’s Priority Open Recommendations has been for HRSA to “issue guidance to covered entities on the prevention of duplicate discounts under Medicaid managed care.”
But in the absence of such HRSA guidance, how can a manufacturer be sure that covered entities have appropriate procedures? Consider that Johnson & Johnson is facing lawsuits from multiple 340B covered entities that don’t want to comply with audits.
What’s more, Medicare paid for nearly one-third of Minnesota’s 340B pharmacy-dispensed prescriptions. The Inflation Reduction Act (IRA) includes a 340B non-duplication provision, so a manufacturer will not be required to provide both a 340B discount and access to the “maximum fair price" (MFP) on a selected prescription. Such drugs as Enbrel, Eliquis, Jardiance, and Xarelto will have MFPs for 2026—and were also among the top contributors to 2023 340B revenues in Minnesota.
To be fair, Minnesota appears to be better than most states at handling duplicate discounts. Madeline Wallack at Rx|X Consulting was kind enough to enlighten me about the state’s approach and procedures for avoiding duplicate discounts. This includes requiring a specific Submission Clarification Code on each 340B claim, posting unique BIN/PCNs, and relying on Prime Therapeutics to set 340B-specific reimbursement rates.
Alas, “Trust, but don’t verify” is not an effective way to oversee a multi-billion-dollar program.
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However, the 340B statute prohibits manufacturers from having to provide a discounted 340B price and a Medicaid drug rebate for the same drug. The prohibition on duplicate discounts applies to traditional Medicaid arrangements as well as Medicaid programs operated by managed care organizations, a.k.a. Managed Medicaid.
Minnesota’s 340B web page outlines the procedures by which covered entities can prevent duplicate discounts. The page states: “Covered entities must have procedures in place to prevent duplicate discounts.”
Do they?
I couldn’t find any information on how or if Minnesota determines whether a covered entity is a good witch or a bad witch. I also couldn’t locate any public audit records.
It’s also not clear if manufacturers can audit compliance. One of the Government Accountability Office’s Priority Open Recommendations has been for HRSA to “issue guidance to covered entities on the prevention of duplicate discounts under Medicaid managed care.”
But in the absence of such HRSA guidance, how can a manufacturer be sure that covered entities have appropriate procedures? Consider that Johnson & Johnson is facing lawsuits from multiple 340B covered entities that don’t want to comply with audits.
What’s more, Medicare paid for nearly one-third of Minnesota’s 340B pharmacy-dispensed prescriptions. The Inflation Reduction Act (IRA) includes a 340B non-duplication provision, so a manufacturer will not be required to provide both a 340B discount and access to the “maximum fair price" (MFP) on a selected prescription. Such drugs as Enbrel, Eliquis, Jardiance, and Xarelto will have MFPs for 2026—and were also among the top contributors to 2023 340B revenues in Minnesota.
To be fair, Minnesota appears to be better than most states at handling duplicate discounts. Madeline Wallack at Rx|X Consulting was kind enough to enlighten me about the state’s approach and procedures for avoiding duplicate discounts. This includes requiring a specific Submission Clarification Code on each 340B claim, posting unique BIN/PCNs, and relying on Prime Therapeutics to set 340B-specific reimbursement rates.
Alas, “Trust, but don’t verify” is not an effective way to oversee a multi-billion-dollar program.
THERE’S NO PLACE LIKE 340B
The best way to bring folks together is to give them a real good enemy.
That’s why extensive litigation, overreach by HRSA, billions of unaccountable dollars, a new administration, and a skeptical Congress may finally trigger 340B reform. Covered entities’ excuses for maintaining the status quo will soon be melting.
Was the 340B program born wicked? Or did it have wickedness thrust upon it? Find out during next week’s Drug Channels Outlook 2025 live video webinar.
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