New Report Unveils Explosion in 340B Spending: PBMs Skirt Criticism, Minnesota Patients Pay

The Minnesota Department of Health’s latest report on 340B covered entities is an important step toward transparency, but only scratches the surface of a much deeper problem. Minnesotans are paying too much for their prescriptions while powerful middlemen quietly cash in.

The 340B program was created so hospitals and clinics in rural or underserved communities could buy medicines at steep discounts and use the savings to lower costs and expand care for low‑income patients. Instead, middlemen pharmacy benefit managers (PBMs) and the contract pharmacies they own or are affiliated with have turned 340B into a lucrative side business, inserting themselves and siphoning off savings that were meant for patients. About 50 cents of every $1 in contract pharmacy profits goes to just four PBM and pharmacy companies.

In Minnesota, the report found the program has become a commercial opportunity for participating organizations and for-profit intermediaries:

• PBMs now control or closely align with many of the contract pharmacies that dispense 340B drugs, including mail‑order and specialty pharmacies.

• Approximately 60% of pharmacies are involved in the program. There are 2,472 contract‑pharmacy arrangements in the state, but half of these are with pharmacies outside of Minnesota.

• Even though the program was created to help low-income patients, 53% of contract pharmacies are located in affluent areas.

• External costs for the 340B program included $120 million paid to contract pharmacies.

• About 45% of 340B profits came from commercial insurance, meaning employers and state employee health plans bear most of the cost.

It’s easy to see why pharmacies want to be a part of 340B – when a 340B‑eligible prescription is filled at a contract pharmacy, the health plan can bill as if the drug were full price, the patient’s copay is calculated off that inflated amount, and the hidden “spread” between the low 340B price and inflated amount is carved up by the hospital, PBM‑owned pharmacy, and other middlemen.

While Minnesota’s hospitals and clinics report more than a billion dollars in net 340B revenue, families still face unaffordable copays and deductibles because program discounts are monetized upstream instead of passed through. Unfortunately, the state’s report only tracks what hospitals take in, but not much else. The report concludes with several questions that remain unanswered, including to what extent 340B benefits patients as intended.  

To stop middlemen from draining a safety‑net program, lawmakers should:

• Prohibit PBM profits derived from pricing of 340B program drugs. 

• Increase transparency into pricing practices and revenue flows of 340B hospitals, PBM-owned or affiliated contract pharmacies, and the contractual relations between them. 

• Require 340B hospitals spend an adequate amount of 340B drug revenues on health programs for in-need patients. 

• Enact guardrails to ensure that 340B savings actually make their way to patients in need.

Legislators need more time to get further investigate the program and to get this policy right. Until Minnesota exposes and reins in these middlemen, the 340B program will keep enriching corporate intermediaries while the patients it was built to protect continue to pay full price.