Brooklyn Roberts Testimony in Kansas: 340B Impact on States, Taxpayers, and the Health Care System
ALEC Health And Human Services Senior Task Force Director Brooklyn Roberts was recently invited to testify before the Kansas State Legislature Special Committee on Pharmaceutical Studies regarding the federal 340B program.
You can read her full testimony below and watch the recording here.
Chairman Gossage and members of the committee: Thank you for the invitation to testify today. I submit this statement for the hearing record on behalf of the American Legislative Exchange Council. The American Legislative Exchange Council is America’s largest nonprofit, nonpartisan organization of state lawmakers dedicated to the principles of limited government, free markets, and federalism to offer nonpartisan research and analysis. I am here today to discuss one of the largest federal programs most Americans have never heard of but one that impacts us all—340B—and its impact on states, taxpayers, and the health care system.
The federal 340B program was created with a straightforward mission—to provide steeply discounted drugs to safety net hospitals and clinics that serve large populations of low-income and uninsured patients. The purpose of the program was to fix an unintended consequence of the Medicaid “Best Price” statute which had led to an increase in drug prices for many safety net providers. Unfortunately, despite noble intentions the program has exploded into a money-grab for hospitals, pharmacies, and pharmacy benefit managers encompassing $66.3 billion in prescription drug sales.[1]
I have written and discussed the 340B program and the need for reform often over the last few years, and in talking with state legislators, there are a few common misconceptions and I would like to address. The biggest and most common myth is that the 340B program doesn’t cost taxpayers. I’d like to discuss three ways this program increases the cost of prescription drugs for states, employers and taxpayers:
I. 340B encourages consolidation of healthcare providers which reduces competition and drives up costs overall.
Consolidation in the healthcare industry has exploded—especially among providers. Hospitals systems acquisition of individual physician practices has become a common practice over the last thirty years and the vast majority of academic research shows it leads to higher prices for patients. This type of vertical integration gives providers more leverage in negotiations, allows them to charge additional fees (i.e.-facility fees), and can bring the “child” facility under the umbrella of a 340B covered entity allowing them to purchase and profit from 340B drugs. According to a newly released report from the Congressional Budget Office (CBO)[2], the 340B program is “one of several factors that incentivizes the integration of hospitals and off-site clinics.”
II. Research shows 340B covered entities are more likely to prescribe more expensive drugs and have higher price markups on prescription drugs.
In addition to consolidation, a recent Congressional Budget Office (CBO) report found that “the 340B program is driving up costs for the federal budget by incentivizing clinicians to prescribe more drugs and higher cost drugs.”[3] 340B covered entities profit when drugs are prescribed and several recent academic studies have found that 340B facilities are more likely to prescribe higher cost drugs and have higher markups. A study published in the New England Journal of Medicine found that price markups at 340B covered entities were more than six times higher than those at independent physician practices[4]; and a report from North Carolina’s State Treasurer found that “340B hospitals in that state billed the state employee health plan an average markup of 5.4 times their acquisition cost for oncology drugs—84.8% higher than the average markup among non-340B hospitals[5]. The 340B program incentivizes hospitals and other providers to favor higher-cost drugs, and this kind of perverse incentive drives up overall spending
III. Reductions or eliminations of common discounts on 340B drugs result in increased costs for taxpayers.
Governments, employers, and payers lose common rebates and discounts on 340B drugs. Pharmacy benefit managers, insurance companies, Medicare, and Medicaid typically negotiate rebates with drug manufacturers on the list price of prescription drugs. 340B drugs are often excluded from rebates because they are already sold to the provider at a steeply discounted price. As a result of these lost rebates, states, employers, and patients are paying higher prices for drugs. A 2024 IQVIA report showed that drug costs for self-insured employers and their workers were 4.2% higher than they otherwise would have been without the 340B program.[6]
Unfortunately, there is a lot of misinformation surrounding the 340B program. I’ve talked about the ways the 340B program is actually costing taxpayers, employers, and states money. In recent years, state legislators have come under a great deal of pressure to support the continued expansion of the 340B program. This has led to a lot of well intentioned, but misguided legislation—primarily mandates to force prescription drug manufacturers to sell drugs at 340B prices to contract pharmacies. In 2025 alone, there were at least thirty 340B mandate bills across the country. ALEC Action, the 501c4 sister organization to ALEC, has opposed this type of price-fixing legislation.
First and foremost, 340B is a federal program, and any mandates requiring the sale of 340B drugs to contract pharmacies should come from Congress. As you have already heard today, the term “contract pharmacy” is not a part of the legislation creating 340B and state mandate legislation is essentially expanding the 340B program past the federal legislation’s parameters.
However, there is room for state action on the 340B program. This year Indiana passed legislation requiring more transparency and accountability for the 340B covered entities. SB 118 requires 340B participants in Indiana to submit data about its participation in the program to the state including, but not limited to, the following:
• The aggregate acquisition cost for all prescription drugs obtained under the 340B program
• The aggregate payment amount received for all drugs obtained under the 340B program.
• The aggregate payment made to pharmacies under contract to dispense drugs obtained. under the 340B program.
• How the 340B covered entity uses any savings from participating in the 340B program, including the amount of savings used for the provision of charity care, community benefits, or a similar program of providing unreimbursed or subsidized care.
The 340B program now accounts for $53 billion in prescription drug sales across the nation. There is little to no transparency or accountability as to how much facilities earn or how that money is spent. Legislation like Indiana’s SB 118 gives states and taxpayers insight into the amount of revenue derived from the program, the amount of revenue contract pharmacies receive from the program, and perhaps most importantly how that revenue is spent.
I will leave you today with a story I read in the New York Times a few months ago that, for me, really drives home exactly how much the 340B program can cost taxpayers. The New York Times article tells the story of a cancer patient who went to a 340B hospital for treatment. The list price of the drug she was given was $2,700. The hospital charged that patient’s insurance company $22,700 for that drug. In the end, the patient was left with a $2,500 hospital bill—more than half her monthly take home pay. Sadly, this story is all too common across the country. With common sense federal reforms and more transparency, 340B could be a great program that would support our safety net hospitals and help them stretch already strained budgets, but as it stands, it has exploded far past its intended parameters and is too often abused with the costs falling on taxpayers.
Thank you again for the invitation to testify.