A decade of abuse of the federal 340B prescription drug benefit program is harming Coloradans. A bill in the Colorado state Senate would sanction that neglect and must be defeated.

The 340B program was created in 1992 to make medications more accessible for low-income and underserved patients by providing discounted pricing to eligible health care facilities.

The program started as a success. Rural, at-risk and underserved patients realized savings. The early success didn’t last.

During the past 10 years, mega-hospitals, national pharmacy chains, and drug middlemen have siphoned billions of dollars of those discounts and padded their profits.

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340B is the only major social safety net program where the benefits flow first to middlemen instead of directly to those who need the aid. Specifically, the proceeds from the $66 billion program flow to hospitals, national pharmacy chains and pharmacy benefit managers. These institutions claim they pass the benefits on to patients or use the funds for charity care, but they fight all efforts to increase transparency.

Dozens of studies by leading publications, including the Journal of American Medicine, show these corporations are padding their profits with 340B revenue instead of lowering the cost of prescriptions for at-risk patients.

A Colorado bill — sponsored by those benefiting the most from 340B abuse — would codify the “profits over patients” practices that hurt the state’s neediest patients.

The worst effects of the bill, SB25-071, include:

• Giving hospitals unchecked authority to contract with as many pharmacies as they want, regardless of whether the pharmacy serves low-income patients or is even located in Colorado.
• Exacerbating the alarming trend toward “pharmacy deserts.” Under SB-071, hospitals will have legal approval to expand the devastating practice of shutting down pharmacies in low-income neighborhoods and shifting sales to pharmacies in wealthy, profitable communities.
• Codifying practices that drive up insurance costs for employers and patients. With passage of the bill there would be no recourse to investigate or correct improper financial practices by any hospital in the state.

The unintended consequences surrounding the unchecked expansion of the 340B program have had a negative impact on the business community, driving up health care costs and threatening local economic stability.

A recent in-depth national study of how abuse of 340B affects health care costs for self-insured companies found employers pay 4.2% more for prescriptions obtained from a 340B-qualified entity. This is unacceptable for a program designed for and mandated to lower the cost of prescription drugs.

Doubling the harm to patients, the higher health care costs driven by 340B abuse translate into higher health insurance premiums. To generate the largest profits, 340B entities are more likely to prescribe more expensive medicines. For patients with employer-sponsored insurance, prescription costs are 150% higher at 340B entities than non-340B entities, resulting in higher premiums to offset costs.

Overall, the ballooning of the 340B program has been estimated to add $5.2 billion to health care costs annually for businesses and their workers, forcing companies to make tough choices between absorbing these costs, reducing employee benefits, or even laying off workers.

Lastly, and perhaps most concerning, more than half of 340B’s contract pharmacy profits are concentrated among just four mega-corporations — Walgreens, Walmart, CVS Health and Cigna. As these massive companies absorb more of the market by leveraging the 340B program, independent pharmacies are placed at an alarming disadvantage. In 2023 alone, it was estimated one independent pharmacy closed every day. This leads to deeper and more damaging pharmacy deserts in the communities that can least afford it.

We wholeheartedly support the original intent of the 340B system and the proper implementation of its benefits. Giving hospitals and other entities carte-blanche and legal protection for their abusive practices is a grievous mistake that will harm patients, businesses and Colorado taxpayers.

Hospitals are pocketing billions in drug discounts that are supposed to be for our families. Together we can stop them. Vote no on SB25-071.

Bryan Head is executive director of The Consumer Health Advocacy Information Network (CHAIN). A nonprofit, CHAIN was formed in 2019 to bring local community voices into the debate on health care and champion the best in bold, creative solutions to fix Colorado’s growing health care challenges.