340B Program Spending Increases Due to Market Trends and Eligibility Expansion

Health care facilities participating in the Prime Vendor Program (PVP) and the 340B drug pricing program—which provides outpatient drugs at a discount to health care facilities—spent $43.9 billion on 340B drugs in 2021, a recent report from the Congressional Budget Office (CBO) stated.¹

The 340B program is a federal safety net program that entitles eligible hospitals to discounts on nearly all purchases of drugs, with nearly 50,000 participating hospitals as of 2021.² Of those, about 90% also participated in the PVP, which facilitates discount negotiations for the Health Resources and Services Administration—that administers the 340B program. The CBO stated in its 2025 report that the amount of money health care facilities participating in the PVP spent on drugs rose by $37.3 billion from 2010 to 2021. Eligible facilities are either hospital-based or federal grantees; the former’s eligibility relies on the percentage of their disproportionate patients, which must be more than 11.75%. The percentage is determined by a hospital share of Medicare patients eligible for Supplemental Security Income and patients eligible for Medicaid.

340B PVP spending increased by nearly $37 million dollars from 2010 to 2021 due to eligibility expansion and market trends. | Image Credit: @onephoto - stock.adobe.com

Discounted drugs purchased through the 340B program can be used for all patient services at a healthcare facility regardless of the patient’s income or insurance status. This creates a net revenue for hospitals or organizations because insurance payments are typically higher than the price hospitals pay for the discounted drugs. This not only helps hospitals or organizations that serve a higher percentage of low-income or vulnerable populations but also allows them to use that revenue to expand services.

340b Program Growth Contributors 

Out of the drugs purchased through the 340B program by health care facilities participating in the PVP, 41% were cancer drugs, 15% were anti-infective drugs, and 14% were immunosuppressants. Almost all of the cancer drugs purchased were by outpatient departments of hospitals and their off-site outpatient clinics. On the contrary, the majority of spending on anti-infective drugs was by federal grantees.¹

The CBO attributed about one-third of spending growth between 2010 and 2021 to trends in marketwide drug spending and a disproportionate growth among drug classes, like cancer and anti-infective drugs, that represent a greater portion of drug spending in the program when compared with the overall market. The CBO attributed the remaining two-thirds to hospital and off-site clinic integration, leading to more eligible facilities; the Affordable Care Act expanding facility participation; and a 2010 change in program allowing hospitals to contract with multiple off-site pharmacies, thus increasing the share of prescriptions participating facilities receive with the 340B discount.

Recent analysis from the American Hospital Association shows the 2010 expansion of 340B eligibility to children’s hospitals, freestanding cancer hospitals, sole community hospitals, rural referral centers, and critical access hospitals. The expansion nearly doubled the number of rural hospitals in the program. There are currently 2600 340B hospitals, 60% of which serve rural areas.³

“Shorter life expectancy, higher all-cause mortality, and higher rates of poverty are challenges for rural residents, who are also less likely than urban residents to have health care coverage through their employers, resulting in more uncompensated care for hospitals that 340B savings help offset,” the report stated.

Overall, the 340B program has grown substantially over the past decade, fueled by policy changes, hospital integration, and rising drug costs. Although it represents only a fraction of the overall pharmaceutical market, the program plays an outsized role in supporting safety-net providers, particularly those serving rural and vulnerable populations. As policy makers debate reforms, it will be critical to balance oversight with preserving the financial lifeline that 340B provides to hospitals and the communities that rely on them.

References

1. Growth in the 340B Drug Pricing Program. Congressional Budget Office. September 2025. Accessed September 10, 2025. https://www.cbo.gov/publication/61730

2. Investigating if 340B led to improved care in underserved populations. AJMC^®. October 28, 2021. Accessed September 10, 2025. https://www.ajmc.com/view/investigating-if-340b-led-to-improved-care-in-underserved-populations

3. American Hospital Association. The 340B Drug Pricing Program: A Small Part of the Prescription Drug Market, Delivering Large Benefits to Patients and Communities. Healthsperien. March 2024. Accessed September 10, 2025. https://www.aha.org/system/files/media/file/2024/03/The-340B-Drug-Pricing-Program.pdf