Patients in New York are already struggling with sky-high medical bills. State lawmakers could make matters worse for patients.
A state legislative proposal moving through the New York Legislature would allow multi-billion-dollar corporations to rake in millions of dollars by exploiting a federal safety net program that is supposed to provide care for poor, rural, and low-income families.
Senate Bill S1913 (Rivera) and Assembly Bill 6222 (Paulin) would codify into state law an arrangement among hospitals, pharmacy benefit managers, and contract pharmacies to markup medications meant for patients under the federal 340B Drug Pricing Program.
Created in 1992, the 340B Drug Pricing Program was designed to serve low-income and uninsured patients by requiring pharmaceutical companies to sell medications at discounted prices to eligible providers. The goal was simple: expand access to care for those who need it most. Over time, the program has grown unchecked, and in the process, become a major revenue generator for hospitals and contract pharmacies.
That’s because hospitals have figured out that they don’t need to pass the savings on to patients. Under the 340B program, it is perfectly legal for covered entities to buy drugs at a lower price, then charge patients full price. With elaborate reimbursement networks and out-of-state contract pharmacy agreements, hospitals take the savings meant for patients and split it amongst themselves, their contract pharmacy and pharmacy benefit manager.
One 340B hospital paid $3,400 for an essential cancer drug under the program—then sold it for more than $25,000. Patients have to ask ourselves: Why are hospitals earning more than $20,000 in profits from a single prescription under a federal program intended for low-income patients?
“It is ironic that some hospitals earn more from administering drugs than do drug firms for developing and manufacturing those drugs,” explains Christopher Whaley, an associate professor at Brown University, and the co-author of a recent UC Berkeley School of Public Health study. After analyzing data from more than 400,000 patients who receive in-hospital infusions of drugs for cancer and other complex conditions, Whaley and his team found that hospitals are marking up infusion treatments by up to 300 percent.
Without any price transparency, or accountability requirements, many 340B hospitals have abandoned the very patients they are supposed to be serving. New York-Presbyterian Hospital has one of the state’s highest operating expenses eligible for 340B discounts, yet it commits just one percent of revenues towards charity care – a percentage that is lower than the state and national averages. All the while, New York low-income taxpayers are required to utilize for-profit pharmacies in Texas.
Hospitals have figured out how to game the 340B system and are reaping billions of dollars in profits. In 2023, hospitals purchased more than $66 billion in discounted treatments under the 340B program – a $12.6 billion increase from the year prior. The 340B program is now the second largest federal prescription drug program. Only Medicare Part D is larger.
Rather than stop these abusive schemes, hospitals and contract pharmacies are looking to pass new state laws that expand their profits. Senate Bill S1913 explicitly protects contract pharmacy arrangements, including the use of out-of-state pharmacies and for-profit entities. The misguided bill doesn’t include any patient protections, hospital price transparency requirements, or mandate that hospitals live up to the 340B promise of charity care for patients in need.
Ultimately, it’s patients, employers, and New York taxpayers that pay higher prices every time they fill a prescription. Currently, the annual cost of the 340B program is $446 million per year. If Senate Bill S1913 becomes law, that figure will increase by $117 million.
As an advocacy organization representing patients, we urge New York lawmakers to oppose SB S1913 and to work toward more comprehensive legislation that guarantees savings for patients, improves charity care, and enhances transparency within the 340B program.
Terry Wilcox is the co-founder and Chief Mission Officer of Patients Rising, a non-profit and nonpartisan patient advocacy organization.
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