The Association of 340B Program Drug Margins with Covered Entity Characteristics

The 340B Drug Pricing Program aims to help facilities serving low-income and uninsured patients to stretch scarce resources by allowing covered entities to purchase outpatient drugs at federally mandated discounted rates while often receiving reimbursement for them at higher rates by commercial payers and Medicare. Despite increasing focus on the expansion and impact of the program, profit margins under 340B have not been fully explored. We aimed to examine drug-, facility-, and geographic-level factors that influence drug margins among 340B covered entities. We conducted a cross-sectional analysis of predictors of facility-level 340B margins for 5 drug classes in a multivariable regression model using 2021 data linked across multiple proprietary and public datasets. Regression results show that drug, facility characteristics, and geographic healthcare market-level characteristics influence drug margins under the 340B program. Adjusted 340B margins were higher in hospital outpatient departments than free-standing offices (ie, hospital-affiliated physician offices and independent, 340B eligible clinics) and among covered entities in more concentrated (ie, less competitive) markets. Covered entity market power, quantified by a facility-level measure of non-340B drug margins indicating pricing power, and area wealth were both associated with higher 340B drug margins. Margins on 340B drugs were higher among facilities in stronger bargaining positions and those serving wealthier areas. These findings add to the growing body of literature on expansions of the 340B program into more affluent communities, informing calls for reforms to ensure the 340B program serves low-income and uninsured patients.