Employers examining their health care spending may be overlooking a significant cost linked to the federal 340B Drug Pricing Program, according to an analysis commissioned by the Diabetes Leadership Council and conducted by IQVIA.
Congress created the 340B program in 1992 to allow eligible nonprofit hospitals and clinics to purchase outpatient medicines at discounted prices. Those providers can then dispense the drugs to insured patients at market rates, with the difference becoming spread revenue. The program was intended to help safety-net organizations finance care for uninsured and underinsured patients.
The Diabetes Leadership Council argues that pharmaceutical companies do not bear the full cost of the discounts. Employers and other commercial payers may absorb much of it through lost drug rebates. Employers generally negotiate rebates to lower prescription costs, but manufacturers do not provide the discount twice when a claim is processed through a 340B provider. In those cases, the 340B provider receives the discount while the health plan pays the full price.
IQVIA's study estimated that employers and commercial insurers forfeited $4.8 billion in drug rebates tied to diabetes patients in 2025 because the claims were filed through 340B providers. The analysis also estimated $7.1 billion in total spread revenue from commercially insured diabetes patients that year. Employers and commercial insurers therefore accounted for 68% of the spread, while drug manufacturers covered the remaining 32% through deeper discounts to 340B providers.
The figures apply only to patients with diabetes, rather than the entire patient population, but the Diabetes Leadership Council said they illustrate the potential scale of the costs absorbed by employers and commercial insurers.
The 340B program has expanded rapidly. Federal data cited by the council show that discounted purchases increased from $53.7 billion in 2022 to $100 billion in 2025. The number of covered entities rose from 1,000 in 1992 to more than 53,000 in 2023, and hospitals represented 87% of the program's volume.
Contract pharmacy arrangements have also grown, increasing from 1,740 in 2010 to nearly 240,000. These pharmacies and other third parties work with 340B hospitals to identify eligible claims. Because they are commonly paid a percentage of each transaction rather than a flat dispensing fee, the council said they have an incentive to locate as many qualifying claims as possible and to direct providers toward higher-priced medicines. The five largest pharmacy chains account for about 77% of these relationships.
The council also highlighted the lack of a formal definition of a 340B-eligible patient. It said this could allow eligibility to be interpreted broadly, potentially including someone born at a 340B hospital who has not received care there since birth.
The organization did not call for the program to be eliminated, acknowledging its role in supporting vulnerable patients. Instead, it argued that greater clarity and transparency are needed to show how 340B revenue is used and whether it is reaching the patients the program was designed to help.
According to the council, available data have not shown a corresponding increase in charity care as the program has expanded. Small and midsize nonprofit hospitals report spending more on charity care than similarly sized for-profit hospitals, while large nonprofit hospitals—the biggest 340B beneficiaries—report lower charity-care spending than their for-profit counterparts despite receiving billions of dollars in spread revenue.
The council said employers helping finance the health care safety net should be aware of their contribution and press for accountability over how the funds are used.
Sources: HR Dive.