340B Growth: Bad for Business in New York

New York employers are under growing pressure from a healthcare system that keeps getting more expensive and harder to understand. The National Alliance offers insights into these dynamics, including the impact of the 340B Drug Pricing Program on New York’s businesses.

What is 340B Costing New York Businesses?

New York employers are under growing pressure from a healthcare system that keeps getting more expensive and harder to understand. As businesses work to keep wages competitive, preserve benefits, and invest in their workforce, healthcare costs continue to climb. Employers are beginning to take a closer look at the factors driving those costs, including the 340B Drug Pricing Program. However, the lack of transparency in the program makes that challenging.

340B was created to help safety-net providers stretch scarce resources and support vulnerable patients — but today, it is unclear if the program is working as intended due to a lack of transparency and guardrails.

The little evidence we do have to draw from indicates that 340B is driving up healthcare costs systemwide — including for employers, since a large share of program revenue comes from the “spread” between a hospital’s 340B-discounted purchase price for a drug and the higher commercial reimbursement.

Understandably, employers are looking for a clearer picture of what 340B is costing them. A new first-of-its-kind tool, the National Alliance Cost Calculator, helps employers estimate how much 340B may be increasing their healthcare costs — adding to the body of evidence that policymakers need to prioritize better transparency within the program, not exacerbate its impact by expanding it.

340B is Raising Costs for Employers and Families

The program drives up costs for employers in several ways. It can encourage hospital consolidation, which often increases prices, and it creates incentives for 340B facilities to prescribe higher-priced medicines to generate a larger “spread” between the discounted purchase price and the reimbursement they receive. 340B additionally results in the loss of rebates. Typically, rebates negotiated on behalf of purchasers help lower employees’ premiums and patients’ cost-sharing at the pharmacy counter. However, these are not shared with employers or passed along to working families when drugs are purchased through 340B.

According to IQVIA, lost rebates alone increase healthcare costs by $51 per beneficiary, adding more than $445 million each year to healthcare costs for New York businesses and families. This includes public employee health plans: the New York state health plan was charged an average of 146% above acquisition cost for 340B drugs, a total of roughly $88.8 million. Public educator plans in New York paid $10.9 million, and local plans paid $18.8 million in overcharges. Those costs translate into higher premiums, greater cost sharing, and fewer resources employers can devote to wages, hiring, and benefits.

At the same time, some of the limited public data available suggests the program is generating substantial revenue for major hospital systems. One analysis of hospital tax filings found that several large hospital systems in the New York City area reported substantial revenue from pharmacy operations, including 340B. For example, NYU Langone reported $873 million in 2024 and Mount Sinai reported $571 million in “340B pharmacy” revenue.

It’s clear that employers and working families are helping finance the 340B system, which begs the question: what are communities getting in return?

Lack of Transparency Leaves Patient Benefit Unclear

In New York, the available evidence makes the patient benefit difficult to decipher. Seventy percent of the state’s 158 hospitals participate in 340B, yet 86% provide below-average levels of charity care. New York-Presbyterian devotes just 1.0% of its operating  costs to charity care. Meanwhile, NYU Langone Health reportedly spent less than 0.34% of its $7.2 billion in annual revenue on charity care, while also spending an estimated $8 million on a 30-second Super Bowl ad designed to promote its brand and star physicians. If 340B is meant to support vulnerable patients, the public should be able to see that more clearly in charity care than in multimillion-dollar marketing.

The same concern applies to contract pharmacies, which are often justified as a way to expand access for vulnerable patients. However, if that were truly the driving purpose, New York would not see nearly two-thirds of contract pharmacies intended to serve poor patients concentrated in high-income neighborhoods. The disconnect suggests the model is functioning less as a means to expand access and more as a large commercial network that benefits major for-profit pharmacies and PBMs, with too little transparency into whether patients are actually benefitting.

“Child Sites” and Contract Pharmacies Cluster in High-Income, Urban, and Suburban Regions

Data from the government agency that oversees 340B sheds light on where covered entities and contract pharmacies are actually located. The maps below confirm that New York’s 340B footprint is concentrated in urban, suburban, and high-income areas, not just the underserved and/or rural communities typically used to justify the expansion. Statewide, 340B contract pharmacies and child sites cluster in the New York City metro area and in the suburbs of the state’s other cities.

And even within New York City, they are disproportionately located in areas like the Upper East Side of Manhattan, while underserved areas like southeastern Queens and south Brooklyn have relatively fewer. 

Covered Entities and Child Sites, Statewide and NYC

Contract Pharmacies, Statewide and NYC

New York Businesses Need More Transparency

Employers in New York are already navigating one of the most difficult business climates in the country. For some businesses, rising healthcare costs are part of a larger question about whether New York is becoming too expensive to grow and do business at all.

To better understand how much programs like 340B are adding to that strain — and whether there is commensurate benefit to communities — employers and policymakers in should be able to answer some basic questions:

• How much revenue is 340B generating for hospital systems?
• How much of that is going to charity care or direct patient support?
• Are contract pharmacies improving access in underserved communities, or simply expanding revenue opportunities?

When it comes to the 340B program, transparency and accountability should come first.