How a Drug Pricing Program is Driving Up Healthcare Costs in Illinois (Chicago, IL) — Illinois has a rich legacy of protecting and defending its most vulnerable residents, providing pathways to healthcare for the uninsured and underserved, and striving toward greater equity for all. It’s a legacy that includes both challenges and meaningful strides in supporting people living with HIV/AIDS, whom I’d dedicated my life to advocating for, including in my current role at Community Access National Network (CANN).
So why are lawmakers in Springfield considering a measure that locks in the flaws of a prescription drug discount program that benefits big hospital systems and for-profit pharmacies at the expense of the state’s most vulnerable?
The program, known as 340B, was created in 1992 as a lifeline for low-income patients. The program gives eligible hospitals the ability to purchase medications at steep discounts with the expectation that savings will be passed on to patients.
Unfortunately, there’s little to no evidence of patients actually benefiting from hospital markups on drug prices. Instead, the program has steered off course, failing the very communities it was designed to serve. To add insult to injury, it’s driving up the cost of healthcare for Illinois taxpayers. The problem? A lack of transparency and an abundance of abuse by large hospital systems.
Today, there are more than 117 340B hospitals in Illinois, including many who provide charity care levels below the national average. Those same large hospitals are able to purchase drugs at up to 50% off while billing insurance companies the full price and pocketing the difference.
What’s more, this broken system has enabled covered hospitals to extend their 340B discounts to for-profit contract pharmacies that are not obligated to report or reinvest profits from the program to patients. These contract pharmacies are generating enormous profits, with margins north of 70% on average for 340B medications. In Illinois, the reality is only about half of the contract pharmacies affiliated with the state’s 340B entities can be found in low-income communities. So, who’s really benefiting?
Expanding contract pharmacies only benefits those who are motivated by their margins and undermines the ability to rein in the middlemen making billions of dollars off of 340B and only harms the reform efforts targeting Pharmacy Benefit Managers (PBMs). This is especially concerning given that 71% of contract pharmacies are owned by PBMs. The 340B program was meant to serve patients, not profits.
The lack of transparency in the 340B program is not just unfair to the most vulnerable. It’s expensive for Illinois taxpayers, who ultimately foot the bill.
More than 90% of Illinois residents are covered by either public or private health insurance, including one in four residents who are covered by Medicaid. When a covered hospital claims a rebate for a 340B drug prescribed to a patient with Medicaid coverage, that rebate is no longer available to the state through a Medicaid reimbursement, as designed. One study estimates that lost rebates due to the expansion of 340B in Illinois have driven up the cost of Medicaid by a staggering $391 per enrollee each year—that’s a $1.5 billion annual bill payable by Illinois taxpayers.
It’s a similar story for employer-sponsored health plans, where an incentive structure that rewards providers for prescribing high-margin 340B drugs has led to higher costs for employers and higher premiums for employees. A 2023 study of reimbursement trends found that, on average, commercial payers were reimbursing hospitals 200% of what they paid to acquire 340B pharmaceuticals, a practice that contributes to the steadily rising costs of cost-sharing plans and, ultimately, to the entire healthcare ecosystem.
Lost state revenue and rising cost burdens on residents are just part of the story. For many uninsured patients, the 340B drug savings will never be reflected on their medical bills. With no oversight or reporting requirements, covered entities can—and do—charge patients exorbitant prices for drugs they’re purchasing at discounted rates, burying low-income families in medical debt. In Illinois, medical debt has become such a pervasive issue that the state is funding a pilot program to provide up to $1 billion in relief to its residents.
It’s time to correct the course on 340B in Illinois. It starts with rejecting House Bill 3350 which reinforces the flaws of the program while accelerating the abuses that already exist. Rejecting it will signal lawmakers’ commitment to a transparent drug pricing ecosystem that works for all patients, taxpayers, and providers.
All Illinoisans deserve a healthcare system that works for them, and there’s no better place to start than ensuring patients come before profits.
How a Drug Pricing Program is Driving Up Healthcare Costs in Illinois
