Income differences between locations of 340B entities and contract pharmacies

To estimate neighborhood income differences between the locations of 340B-covered entities and their contract pharmacies (CPs) and examine whether these differences vary between hospitals and grantees.

Cross-sectional study.

Using Health Resources and Services Administration 340B Office of Pharmacy Affairs Information System and zip code tabulation area (ZCTA)-level US Census Bureau databases, we created a unique data set that contains covered entities' characteristics, CP use, and ZCTA-level median household income in 2019 for more than 90,000 pairs of covered entities and CPs. We computed income differences between each pair and for a subset of pairs in which the pharmacy is within 100 miles of the covered entity for both hospitals and federal grantees.

On average, median income in the pharmacy's ZCTA is about 35% higher than in the covered entity's ZCTA, with little difference between hospitals (36%) and grantees (33%). Roughly 72% of arrangements cover less than 100 miles; in that subset, income is about 27% higher for pharmacy ZCTAs, with little difference between hospitals (28%) and grantees (25%). In more than 50% of arrangements, the median income in the pharmacy's ZCTA is more than 20% higher than in the covered entity's ZCTA.

CPs serve at least 2 purposes: They can increase low-income patients' access to medicines directly when a CP is closer to where a covered entity's patients live, and they can increase profits for covered entities (some of which are potentially passed on to patients) and CPs. We find that in 2019, both hospitals and grantees used CPs to generate income but generally they do not appear to contract with pharmacies located in neighborhoods where low-income patients are likeliest to live. Prior research findings have suggested that hospitals and grantees behave differently from each other with respect to CP use, but results of our analysis suggest the opposite.