Why 340B Is Essential for Children's Health

In 1992, Congress created a program to improve access to vital health care services and essential medicine for all regardless of their ability to pay.

Costs of drugs had risen dramatically, and safety-net health care providers like children’s hospitals continued to support — and still support — underserved families even when they were reimbursed less than the cost of providing care.

The 340B Drug Pricing Program was meant to fill that gap, helping these providers “stretch scarce federal resources as far as possible, reaching more eligible patients and providing more comprehensive services.”

The need for the program has only grown. Since the 1990s, prescription drug costs have risen three times as fast as the overall rate of inflation.

Today, nearly a dozen life-changing drugs cost upwards of $1 million.

Because of this bipartisan program, children’s hospitals can support more low-income patients, improve access to care, and provide more comprehensive services to communities with fewer resources.

What is 340B?

The 340B program allows hospitals that treat large numbers of low-income patients to purchase outpatient drugs at lower prices.

The discounts improve access for all patients regardless of payor by supporting hospital operations and freeing up resources to provide services that Medicaid and other payors do not fully cover, like behavioral health services, annual flu vaccinations, affordable prescription drugs, and hemophilia treatment centers.

The program requires hospitals to fulfill stringent requirements to be eligible. Every year they must get recertified, a process that includes demonstrating compliance, maintaining auditable records, and continuing to serve a high percentage of low-income patients. Children's hospitals also annually submit cost reports to Medicaid agencies and report financial assistance and community benefits to the Internal Revenue Service.

Why do children’s hospitals need 340B savings?

Fifty-four children’s hospitals rely on the 340B program. In general, 340B functions as a stabilizer, allowing hospitals to preserve services that would otherwise be at risk because of inadequate reimbursement.

Children’s hospitals are safety-net providers that treat children regardless of their ability to pay. Because more than half of the patients treated at many children’s hospitals are covered by Medicaid, they face persistent gaps between what care costs and what they get paid.

For some children’s hospitals, the 340B discounts simply allow their specialized pharmacies to continue to operate. Others redirect 340B discounts to concrete services like behavioral health clinics, school-based screenings, specialty treatment centers for rare conditions, and programs that offset prescription costs.

All invest heavily in community benefit programs. In 2022 alone, tax-exempt hospitals, which include children’s hospitals, provided nearly $150 billion in total benefits to their communities.

What pharmacy services do children’s hospitals provide?

Children’s hospital pharmacies provide specialized medications, monitoring, and expert care tailored to children’s unique needs.

Disruptions in patients’ care — especially for children with complex medical conditions — can have a significant impact on children’s health and long-term well-being.

Take six-year-old Brynn Shulte, who requires a specialty medication every other day to survive. Making sure everything goes right requires a local, dedicated pediatric team at Cincinnati Children’s Hospital that must closely monitor and coordinate Brynn’s care. Without 340B, the pharmacy would be at risk of closing, leaving Brynn and 900 children like her at risk.

Why does 340B matter for children’s health?

Without 340B savings, hospitals may have to scale back clinics, delay investments in mental health capacity, or close their specialty pharmacies. Children could face longer waits, fewer specialty services, and reduced access to pediatric-focused pharmacy care.