340B Program Growth Raises Concerns Over Tax Revenue and Medicare Costs

As specialists in 340B, infusions, and TPA consulting, Remy is committed to keeping you informed about the developments impacting your practice and the patients you serve. This post covers a document published in November 2024 - see the closing section for how the policy landscape has shifted since.

In November 2024, Dan Crippen - a former director of the Congressional Budget Office (CBO) - published a memo arguing that the growth of the 340B Drug Pricing Program has a meaningful effect on the federal budget. It is important to be precise about what this document is: the analysis is Crippen's own, written in a private capacity. It is not a Congressional Budget Office publication and does not represent CBO's institutional position on the 340B Program.

What the 2024 Memo Argued

Crippen's memo focused on shifts in both the scale and the financial impact of the program. Citing rapid growth in participation and in manufacturer discounts, he raised concerns about declining tax revenues and increased government spending.

Here's a breakdown of the memo's main claims, and their potential implications for the healthcare industry:

Key Claims in the Memo

Every figure below is the memo author's own estimate, not an official government score. They are contested, and the sections that follow explain where.

Explosive Growth: Since 2010, the number of covered entities participating in the 340B Program has surged, with thousands of retail pharmacies joining. Crippen estimated that by 2023 the total value of manufacturer discounts to covered entities reached $125 billion. That headline number is ambiguous on its face: it matters a great deal whether it represents the list-price value of drugs moving through the program or the actual dollar value of the discounts themselves, and the two are very different quantities. 340B stakeholder organizations, including hospital and health center associations, dispute both the figure and the framing.

Tax Revenue Decline: The memo argues that the program shifts revenue from taxable pharmaceutical manufacturers to non-profit hospitals, and estimates the resulting federal tax revenue reduction at $14 billion in 2023, with a further estimated $3.5 billion annually in state and local tax revenue. Again, these are the author's estimates rather than official revenue scores, and they depend on assumptions about how manufacturers and hospitals would behave in the absence of the program.

Medicare Costs: The memo argues that program growth has increased Medicare Part B and Part D spending, on the reasoning that hospitals purchasing at 340B prices are reimbursed above their acquisition cost.

Contested Points

Oversight: Program oversight is one of the most argued-over aspects of 340B. Federal watchdogs including the Government Accountability Office (GAO) and the HHS Office of Inspector General (OIG) have published work over the years examining HRSA's oversight of the program and the transparency of how covered entities use 340B savings. Critics, including the memo, read that body of work as evidence of inadequate oversight; covered entities and their associations argue that the program's benefits reach patients in ways the reporting does not capture. Readers should treat this as a genuinely disputed area rather than a settled finding, and consult the underlying reports directly.

Incentives for Higher Drug Costs: The memo asserts that 340B participation may push hospitals toward more expensive drugs in order to capture larger discounts. This is a contested assertion rather than an established fact - it has been argued in the policy literature and rejected by 340B stakeholder groups, and the evidence is mixed.

The Bottom Line

The memo's argument is that as the 340B Program grows, its effect on federal and state budgets grows with it, and that this warrants stricter oversight and potential reform. Safety-net providers and their associations counter that the program is doing exactly what Congress designed it to do, and that reforms aimed at the budget effect would fall hardest on the patients the program exists to serve. Both positions are worth understanding if you operate a 340B program.

Where 340B Policy Has Moved Since

This post covers a single November 2024 document, and the policy landscape has moved substantially since it was written. If you are reading this for a current picture, the developments that have mattered most are:

• Manufacturer contract pharmacy restrictions. A growing number of manufacturers have limited 340B pricing at contract pharmacies, reshaping access for covered entities that rely on them. The restrictions have been the subject of extended litigation.
• The rebate model debate. Several manufacturers have pushed to replace up-front 340B discounts with a back-end rebate model, which would change cash flow and administrative burden for covered entities significantly. We cover this in 340B rebate model: what covered entities need to know.
• State contract pharmacy laws. A number of states have enacted laws restricting manufacturers' ability to limit 340B pricing at contract pharmacies, producing a patchwork that varies by state and continues to be litigated.

Need Assistance? It's What We Do

At Remy, we understand the complexities involved in running a 340B program through a shifting policy environment. Whether refining program management for 340B compliance or upgrading your infusion therapy services, Remy offers the support your organization needs.

Here's how we can assist you:

Comprehensive 340B Compliance Services: Our team will help you work through current HRSA reporting requirements and strengthen your compliance posture. We streamline the entire process, from auditing and documentation to optimizing your purchasing strategies to make the most of the program.

Infusion Therapy Optimization: We guide healthcare providers through adopting cutting-edge infusion technologies, like smart pumps and telemedicine platforms. Integrating these tools into your practice can enhance patient safety, reduce errors, and improve patient experience.

Training and Support: Transitioning to new systems and compliance structures can be daunting. Remy offers in-depth training for your staff, ensuring they are fully equipped to handle the latest advancements in infusion therapy and 340B program management. From compliance to technology integration, we are here to make the transition as seamless as possible.

Tailored Solutions for Your Practice: No two healthcare organizations are the same. That's why we customize our consulting services to meet your unique needs. Whether you're a rural hospital evaluating whether additional sites qualify under existing 340B eligibility criteria or a large healthcare provider implementing personalized medicine through genomic-based infusion therapies, we have the tools and expertise to help you succeed.

What the 340B Budget Debate Means for Covered Entities

340B policy debate is not going away, and the budget arguments raised in 2024 continue to shape proposals today. A program that is well documented, well governed, and well understood internally is far better positioned for whatever direction reform takes.

At Remy, we are committed to guiding healthcare providers through this landscape with personalized consulting services. Let us help you navigate the complexities.

Contact us today to learn how we can support your practice in the evolving healthcare environment.