OBJECTIVES: The 340B Drug Discount Program ("340B program") is a federal program in which manufacturers provide discounted outpatient drugs to participating 340B-covered entities. The financial flow of the program is complex and involves hidden costs. 340B hospitals have proposed sharing 340B revenue with self-funded employers as part of a direct contract. This study aims to quantify the financial impact of this revenue sharing to employers and other healthcare stakeholders.

METHODS: We created a model to analyze the financial impact of 340B revenue sharing, with parameters estimated using national samples of consumers, payers, products, and providers. Five scenarios were modeled: (A) status quo (20% of workers and prescriptions are 340B eligible), (B) counterfactual where 340B does not exist (0% 340B eligible), (C) employer plan enters into a direct revenue-sharing contract with a 340B hospital (50% 340B eligible due to site of care shifts, 20% revenue-sharing), (D) adds hospital markups to C, and (E) expands 340B eligibility (75% 340B eligible) to D.

RESULTS: In the status quo (A), total healthcare costs for self-funded employer plans were 1.6% higher, due to lost rebates, than B’s counterfactual where the 340B program doesn’t exist ($4,009 per covered worker vs. $3,945). When comparing C, D, and E to A, the cost for employer plans increased by 1.8% ($4,080), 14.3% ($4,583), and 15.9% ($4,648), respectively, as lost rebates and added hospital markups exceeded 340B revenue shared. Under these scenarios, revenue decreased for manufacturers (8-23%), pharmacy benefit managers (18-60%), and non-hospital providers (30%), but increased for the 340B hospital (1,025-1,464%). Results were robust to sensitivity analyses.

CONCLUSIONS: 340B discounts conflict with manufacturer rebates, causing hidden revenue loss for employers. Participating in a 340B revenue-sharing agreement may sound enticing, but it is likely to exacerbate revenue loss for employers and other healthcare stakeholders, benefiting only the 340B hospital.