A new report paints a stark picture of how a subset of large healthcare providers is drawing the lion’s share of 340B savings within a single state.
The controversial drug discount program has been under tight scrutiny amid claims from critics—notably the pharmaceutical industry—that it’s become a profit center for major health systems rather than the struggling safety-net hospitals it was designed by Congress to support.
In 2023, Minnesota passed legislation requiring covered entities (participating providers) to report their annual 340B purchases and payments to the Minnesota Department of Health (MDH), the only 340B transparency measure of its kind in the country.
The most recent report (PDF), published Friday, outlined at least $1.34 billion of net 340B revenue among the state’s collective covered entities during 2024, with the MDH suggesting that it was likely an undercount “due to challenges in capturing office-administered drugs.”
The tally comes from $3.04 billion total reimbursements from the program minus $1.53 billion of acquisition costs (what covered entities paid for dispensed and administered drugs) and $165 million of operational costs. The report’s $1.34 billion net revenue total was more than double the prior year’s $630 million, though the report’s authors cautioned that most of the year-to-year difference stems from more complete reporting of office-administered drugs.
When looking at the types of organizations that participated, the MDH found 23 large hospitals that qualified for the program due to their disproportionate share hospital designation generated “by far the largest net revenues.”
Those comprised 12% of the state’s 181 reporting entities but together tallied more than 80% ($1.08 billion) of Minnesota covered entities’ collective net 340B revenue. That amount averaged out to just over $47 million per hospital, with a few entities driving a particularly outsized portion of the activity: M Health Fairview – University of Minnesota Medical Center ($334.7 million net 340B revenue, or 26.1% of the state’s total), Abbott Northwestern Hospital ($154 million, or 12%) and Hennepin Healthcare ($99.7 million, 7.8%).
On the other end of the spectrum were safety net federal grantees, a category of 16 covered entities that included federally qualified health centers that together collected less than 1% of net 340B revenue. Additionally, there were seven hospitals and eight grantees that reported 340B transactions but had $0 or less in net 340B revenue, which the department said can be the result of different reimbursement structures and requirements for some covered entities to provide 340B drugs for free or at discount.
When looking at specific products, the health department outlined a small number of drugs that represented a “significant” portion of hospitals’ acquisitions and gross 340B revenues.
For example, while the top 50 drugs reported by hospitals to be dispensed most frequently represented $185 million of the program’s gross revenue, just three drugs on the list (Trikafta [elexacaftor-tezacaftor-ivacaftor], Humira [adalimumab] and Keytruda [pembrolizumab]) generated $73 million, or almost two-fifths of the top 50’s total.
“These data suggest that certain drugs have disproportional potential for 340B revenue—so much so that the program may incentivize prescribing patterns, influence service decisions, and may contribute to increases in overall health care spending,” the report reads.
The MDH said its report gives policymakers “a valuable tool” to make improvements to the program, though key questions regarding the program and its effects remain unanswered. These include how the net revenues are used by hospitals, whether participation affects drug utilization, whether drugmakers are raising drug prices to make up for the discounts and which specific factors have contributed to the 340B program’s substantial growth over the past several years.
Minnesota’s report comes at a sensitive time for the drug discount program. Under a similar call for greater transparency, Sen. Bill Cassidy, M.D., R-La., the Senate’s leading health official, last month sent an information request to Apexus—which has for more than 20 years served as the 340B program’s prime vendor, negotiating drug prices for providers in exchange for fees—asking the private company to describe its revenues and business practices.
The Trump administration also appears to have found compelling drugmakers’ claims of overuse and, potentially, misuse. It attempted to implement a pilot program at the top of this year that would have swapped out the programs’ discounts with manufacturer-directed rebates—an approach the pharmaceutical industry said would limit improper or duplicate discounts—but was blocked in court by hospital associations and subsequently dropped the program. The administration is now spinning up a second attempt to implement the rebate pilot, having opened a new public comment period for feedback last month.
More recently, the administration took a step to rein in a state-led push to maintain providers’ flexibility in securing the discounts.
In Colorado, a law that prohibits drugmakers from placing restrictions on covered entities’ contract pharmacy agreements (similar to some passed in other states) was challenged in court by AbbVie and, after a district court’s denied preliminary injunction, appealed to the 10th Circuit. In a first for such litigation, the Justice Department filed last week in support of the drugmaker, arguing that Colorado’s law was preempted by federal statute outlining the program and the federal government’s role in oversight and enforcement.