If New York legislators have questions about the efficacy of the 340B Drug Pricing Program, they should look closely at a recent 340B transparency report from the Minnesota Department of Health — a report that paints a bleak, concerning portrait of a program failing to achieve its intended mission. The federal 340B program, created by Congress in 1992, allows certain hospitals and clinics to buy prescription drugs at steep discounts, enabling them to stretch limited resources and support care for vulnerable patients in underserved areas. It’s an honorable mission. But as the program has grown, serious questions have emerged about how those savings are used and whether the program still works as originally intended.

Minnesota’s recent 340B report revealed data from a program far more complex — and costly — than is often acknowledged. The state’s covered entities, including hospitals and other grantees, brought in about $1.34 billion in net revenue from the sale of 340B prescriptions in 2024. More than 20% of that revenue was generated by the state’s own healthcare offerings. 

Presently, New York State lawmakers are considering a proposal that would essentially “put the cart before the horse.” The state Senate included language in its one-house budget that would allow for unfettered expansion of the 340B program. This action would bypass a significant portion of the lawmaking process and, in doing so, remove the decision from public input. These decisions are too substantial and impactful to relegate to the state budget process.

What can New York learn from Minnesota's experience with 340B prescriptions

Let’s examine some of the complexities of the Minnesota data. Minnesota’s report found that covered entities spent about $165 million to administer their 340B programs. Most of those dollars did not stay within the hospitals or clinics. Instead, more than 80% of total operating costs went to external vendors and intermediaries, with contract pharmacy fees accounting for nearly 90% of those outside payments. In effect, about 10% of Minnesota’s total 340B profit ultimately flowed to entities that are not covered entities at all. The remaining funds were spent on internal costs, including personnel.

The program’s revenue sources documented in the report also raise important questions about its focus. Nearly 20% of Minnesota’s total 340B net revenue was generated from publicly funded programs—Medicaid and MinnesotaCare. The remainder came largely from prescriptions written for patients with commercial insurance and Medicare, underscoring how much the program relies on payments tied to insured patients rather than the uninsured populations it was originally designed to support. How much of the revenue generated by 340B savings is being used to support patients in need? 

Digging a little deeper, Minnesota’s reporting revealed that the state’s covered entities have relationships with 1,172 child sites (outpatient facilities) and 2,472 contract pharmacies. Every prescription filled at these sites is eligible for 340B savings, generating even more revenue. However, close to half of those contract pharmacy relationships were between covered entities in Minnesota and out-of-state pharmacies. This practice is very common across many states. According to the Pioneer Institute, 25% of contract pharmacies for the top New York hospitals are located out of state, including Texas. Worse still, about 64% of New York’s contract pharmacies meant for low-income patients are in affluent neighborhoods.

How New York can do better with 340B

Minnesota’s experience illustrates a fundamental tension within the 340B program. A system designed to help safety-net providers has evolved into a complicated financial system, one in which administrative costs, vendor payments, and revenue incentives continue to shape the program. As a result, the program has driven up government costs, private-sector healthcare coverage, and employer and worker costs. 

New York legislators have a critical opportunity to reform and improve the 340B program. Before acting on legislation in the state budget that expands the program without necessary accountability measures and guardrails in place, our state leaders should review Minnesota’s thorough and eye-opening report and work toward a plan that ensures funds from 340B are spent in accordance with the program’s intent, benefiting the patients it was designed to support. Effective 340B reform should start with transparency and reporting requirements that would expose any form of abuse and restore accountability. 

Minnesota has sounded the alarm. New York lawmakers should heed the warning and respond. Real reforms of the 340B program cannot wait.

Steven Newmark, JD, MPA, serves as the chief policy officer for the Global Healthy Living Foundation, a nonprofit organization with the mission to improve the quality of life for people with chronic illnesses by advocating for improved access to health care at the community, state, and federal levels.

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