The 340B Drug Pricing Program was once the kind of healthcare policy few people outside Washington insiders and hospital finance offices ever discussed. Today, it is regularly debated in legislatures, covered frequently by local and national media, and cited by many healthcare leaders as critical to the survival of some hospitals—making questions about the program’s original purpose more relevant than ever.

A new study led by researchers at the University of Minnesota School of Public Health (SPH) and funded by the Commonwealth Fund traces the origins of the 340B Drug Pricing Program back to its passage as part of the Veterans Health Care Act of 1992. According to SPH Associate Professor Sayeh Nikpay, a leading national expert on 340B and the study’s lead author, the research helps address a longstanding gap in understanding what Congress originally intended the program to accomplish.

“One of the challenges in evaluating 340B today is that the authorizing legislation tells us very little about why Congress created the program in the first place,” Nikpay said. “We wanted to understand the problem lawmakers were trying to solve, who they intended to help, and how they envisioned the program working.”

To answer those questions, the researchers analyzed more than 175 internal policy documents from key Senate and House health committees from the early 1990s, and also conducted nearly 20 interviews with individuals directly involved in the creation and passage of the legislation, including congressional staff, policymakers, advocates, pharmaceutical industry representatives, and healthcare experts.

The study, published in The Milbank Quarterly, sheds new light on the program’s origins, including:

• Congress created 340B after a separate federal drug pricing policy unintentionally increased medication costs for safety-net providers including Public Health Service Act funded clinics and public hospitals. The program was designed to help those providers continue serving patients regardless of their insurance status or ability to pay.
• Congress intended the program to protect these safety-net providers because they operated with limited financial resources and requirements to provide care regardless of patients’ ability to pay. Both types of providers, public hospitals and clinics funded by the Public Health Services Act, relied primarily on relatively unstable public funding drug price increases set off by the Medicaid Drug Rebate Program crowded out other types of care provided by these clinics. Policymakers sought to ensure that clinics and public hospitals could continue providing care to all patients despite rising drug costs.
• The current 340B program is substantially larger than lawmakers originally envisioned. Eligibility criteria later added in the policy process broadened the program and ultimately allowed it to expand far beyond its original target of publicly funded health clinics and public hospitals that primarily serve lower-income and uninsured patients. Most importantly, the eligibility criteria now used to qualify many large, non-profit hospitals were originally created to qualify just two specific non-profit academic medical centers as part of bipartisan political compromises.

“The debate over 340B often centers on whether the program is fulfilling its intended purpose,” Nikpay said. “Before you can answer that question, you need a clear understanding of what that purpose actually was. Our study provides historical context that has often been missing from those conversations. By documenting who Congress intended to help, and the specific problem lawmakers were trying to solve, we hope to provide a foundation for more informed discussions about the program’s future.”