The Minnesota Department of Health’s recent report and the National Alliance’s new Cost Calculator make it clear: 340B has a significant impact on Minnesota businesses and working families, and locking in the program’s continued expansion would raise costs.
Minnesota 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.
The Minnesota Department of Health’s (MDH) latest 340B Covered Entity Report is the closest thing we have to a gold standard for 340B transparency — the first state to quantify the size of the 340B program and put real numbers in the public domain. The authors estimate covered entities generated at least $1.34B in net 340B revenue in 2024, although they note this is likely still an undercount.
The additional visibility comes as Minnesota lawmakers consider S.F. 3769 and its companion, H.F. 3609, which would further entrench Minnesota’s contract pharmacy network. Importantly, the data also show that employers are funding nearly half of the 340B “spread” (the difference between the hospital’s steeply discounted acquisition cost and the inflated price they charge employers) in the state. The authors estimate that ~45% of net 340B revenue comes from commercial reimbursement, or $608M out of an estimated $1.348B total in the state.
This matters far beyond Minnesota. For years, 340B debates have been driven more by anecdotes than actual data. On behalf of employers, unions, and working families, the National Alliance and other allies are beginning to ask: where is that money going, and what are purchasers getting for it? The findings of the first-of-its-kind report provide few answers to those questions.
340B is highly concentrated in a few big hospital systems.
The state’s largest 340B hospitals generated over $1B in net 340B revenue in 2024 – over 80% of the statewide total. Of that, an estimated $470M came from commercial insurance at disproportionate share hospitals (DSH) hospitals alone. Just one hospital system, M Health Fairview, accounted for an estimated $335 million in 340B profit.
The report confirms that these are generally large, integrated, and optimized systems: the state’s 23 DSH parent hospitals have networks of 761 child sites and 840 contract pharmacies.
The “truest” safety-net providers are not seeing nearly as much benefit
MDH notes that half of grantees spent at least 54% of their gross 340B revenue on operational costs (administration, staffing, contract pharmacies, third-party administrators, etc.). For many of the providers the program is most often invoked to justify, the returns look much thinner than they do for the state’s largest tax-exempt hospital chains.
For-profit contract pharmacies and consultants profit
$137M – or nearly 10% of gross 340B revenues – never reached targeted covered entities and were instead spent on external costs, predominantly for-profit contract pharmacies that are often owned by Fortune 500 companies. Put another way: for-profit pharmacies extracted four times as much 340B revenue in Minnesota than all the state’s community health centers and disease-specific health centers combined. In too many cases, this revenue stream appears to be lining the pockets of intermediaries rather than directly supporting care.
Those findings are especially relevant because Minnesota lawmakers are considering S.F. 3769 and H.F. 3609, which would make the state’s existing contract pharmacy protections permanent. Under current Minnesota law, drug manufacturers are barred from restricting, prohibiting, or otherwise interfering with delivery of 340B drugs to pharmacies under contract with covered entities, but that protection is set to expire on July 1, 2027. These bills would remove that expiration date and add an enforcement provision allowing the attorney general to treat violations as unfair or deceptive trade practices. In effect, S.B. 3769 and H.F. 3609 would preserve and strengthen Minnesota’s current legal protections for contract pharmacy arrangements.
Cost Calculator tool further illustrates impact on employers
The National Alliance recently unveiled a new 340B Employer Cost Impact Calculator tool that helps individual employers estimate how 340B may be affecting their own healthcare costs. Employers and union benefits leads in Minnesota and across the country can enter basic information to get a sense of the estimated annual burden of 340B on their healthcare costs. By translating broad system trends into plan-level estimates, the tool can help purchasers make informed, value-based decisions about their benefits and give policymakers a clearer sense of the program’s wide-ranging impacts.
The National Alliance agrees with the MDH report’s authors: more transparency is needed
The report is explicit that it does not cover 340B’s broader system impacts, such as incentives for consolidation, distortions of prescribing patterns, or lost rebates to employers, which other research indicate have significant impacts for employer-sponsored health plans and the state employee health plan. It also contains no data on how covered entities use net 340B revenues.
The authors note that additional transparency would require further legislative action. The National Alliance concurs.
On behalf of employers in Minnesota and across the country, we urge Minnesota legislators to bolster the state’s pioneering legacy before moving forward with S.B. 3769 and H.F. 3609. Policymakers should empower the Department of Health to collect more robust and detailed data on 340B’s impact on healthcare costs and communities – not lock in a revenue stream for for-profit chain pharmacies that the report shows currently siphon $10 out of every $100 in 340B revenue.
