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NC treasurer: NC hospitals use 340B to profit a patient’s expense

A new report from the North Carolina State Treasurer found North Carolina hospitals use the federal 340B program to profit at the expense of patients, teachers and state employees.

Section 340B of the Public Health Service Act requires pharmaceutical manufacturers participating in Medicaid to sell outpatient drugs at discounted prices to health care organizations that care for many uninsured and low-income patients.

According to the report, North Carolina 340B hospitals:

  • Charged NC state employees, on average, a price markup of 5.4 times the hospitals’ discounted 340B acquisition cost for outpatient infused cancer medicines.
  • Billed the North Carolina State Health Plan for Teachers and State Employees a price markup that was 84.8% higher than North Carolina hospitals outside of the 340B program.
  • Collected as much as $6,026 in average profits per claim, charging up to 12.7 times their 340B acquisition costs for outpatient infused cancer medicines.

The report also looked at how North Carolina 340B hospitals are using their contracts with pharmacies, and their offsite outpatient facilities, finding drastic growth in the number of locations overall but not in underserved communities. Over time, North Carolina 340B hospitals:

  • Contracted with pharmacies in wealthier communities, with average inflation-adjusted median household income of $76,194 in 2020 (compared to $53,857 in 2012). These were communities where, on average, fewer residents were uninsured and where there was a lower average percentage of Black residents.
  • Expanded to wealthier communities through offsite outpatient facilities, or child sites. These facilities were in communities that had lower rates of uninsured residents and were 24.4% more affluent in 2020 than in 2012.

This report confirms what numerous national studies have found – large 340B hospitals, pharmacies and pharmacy benefit managers are using the federal 340B program to profit without any benefit to patients.