10 hours ago
Cancer Patients Are Overmedicated To Enrich Health Systems
View of doctor's office with equipment and iv drip bag on the steel pole.
Are patients being prescribed more medications not for their health, but to generate profit? A new economic study published in The Journal of Health Economics reveals that cancer patients treated by physicians participating in the 340B Program receive more medications—including those outside clinical guidelines—without improvements in survival.
The federal program, named after Section 340B of the Public Health Service Act, was created by Congress in 1992 to support hospitals and clinics serving low-income communities. It allows eligible entities to purchase outpatient drugs at steep discounts and receive full reimbursement, retaining the difference. The Affordable Care Act expanded eligibility criteria, accelerating the program's growth.
Since 2012, the number of 340B-eligible entities has tripled to more than 60,000. Between 2013 and 2023, discounted drug purchases under the program rose from $8 billion to $66 billion, largely driven by eligible hospitals and their affiliated outpatient facilities. Today, nearly 60% of U.S. pharmacies serve as contract pharmacies, dispensing drugs for 340B-eligible entities. This rapid growth reflects the lucrative 'buy-low, sell-high' opportunities created by the program.
Dr. Danea Horn at the University of California, San Francisco, studied the prescribing behavior of physicians treating breast cancer patients before and after their practices began participating in the 340B Program. Her findings are striking: the likelihood of prescribing outpatient drugs per patient increased by over 25%, and the intensity of drug treatment rose by 40%, including medications not aligned with clinical recommendations.
Despite increased medication use, the study found no evidence of improved patient survival—consistent with research indicating that 340B participation does not enhance hospitals' inpatient care quality. As Dr. Horn concluded, the 340B Program is fundamentally a 'cash transfer program' that distorts healthcare markets by inflating drug profit margins, an incentive to which providers actively respond.
Recent research found that 340B-eligible hospitals secured substantial profit margins on outpatient drugs and that the program discouraged biosimilar adoption, favoring more expensive brand-name drugs with higher 340B profit margins. Additionally, hospitals strategically manage their patient mix to game the 340B eligibility criteria and expand into wealthier neighborhoods to capture lucrative outpatient drug margins.
In effect, the 340B Program gives eligible entities a substantial financial advantage, creating a deep moat that fends off competitors. Independent physician practices and for-profit hospitals, regardless of their patient mix, are ineligible for the program but must compete with eligible nonprofit hospitals.
This uneven playing field has driven vertical integration, prompting hospitals to acquire physician practices and expand clinics to increase drug revenue. These actions raise commercial prices and worsen the financial burden on patients, directly contradicting the 340B Program's original intent.
It's tempting to blame hospital greed for their relentless expansion of 340B-driven operations. However, hospitals—like all other players in healthcare—respond to the incentive structure around them. Why should they be expected to leave easy 340B money on the table? Bad rules ruin the game, often in ways unforeseeable to well-intentioned rulemakers.
Reforming the 340B Program is politically challenging, as it has evolved into an indispensable cash cow for eligible entities, creating entrenched financial and political interests committed to sustaining and expanding it. However, as the public becomes increasingly aware of the nature and implications of this rapidly growing program, a tipping point may emerge for reforms that prioritize and directly empower patients rather than the healthcare entities serving them.
