A broken federal program leaves Black Californians behind while corporations profit | Opinion

Across California, thousands of people are struggling to afford basic needs, including prescription medications. This burden falls hardest on our communities of color, who face higher rates of chronic disease.

The federal 340B program was created to help low-income and uninsured patients access their medications, supporting vulnerable communities in managing their health. Unfortunately, the program has strayed far off course and is failing the Californians who rely on it most. At the same time, California lawmakers are considering legislation that would only worsen exploitation and abuse of 340B, rather than focus on patient-centric solutions that help our neediest neighbors.

The 340B program requires pharmaceutical manufacturers to provide prescription medicines at significant discounts, as high as 50%, to certain qualifying health-care organizations and entities, such as hospitals and health clinics (often called “covered entities”). Although the program is intended to help vulnerable patients, in practice, 340B has strayed far from this goal.

Today, the 340B program is rife with fraud and abuse. It has morphed into a significant profit driver for large retail pharmacies, pharmacy benefit managers and hospitals in California. These huge corporations are siphoning funds from the 340B program to pad their bottom line, instead of passing savings from 340B prices along to patients. For example, CVS has previously said on an earnings call that 340B was a major driver of revenue in 2021, which exceeded expectations.

Notably, needy patients do not receive a discount at the pharmacy for a 340B medication — they pay full price.

Three of the largest pharmacy chains account for 60% of the contract pharmacies in the program today, and a report found that the average profit margin on 340B medicines dispensed through contract pharmacies was 72%, compared with just 22% for non-340B medicines.

The 340B program is increasingly leaving marginalized communities behind. Black and Latino communities, in particular, are facing significant challenges in accessing the benefits of this program as contract pharmacies leave low-income communities for wealthier ones. From 2011 to 2019, the presence of 340B pharmacies in socioeconomically disadvantaged and minority communities decreased while the share of 340B pharmacies in the highest income neighborhoods increased.

Currently, only 15% of contract pharmacies in California are located in lower income areas, and 83% of 340B hospitals in California are below the national average for charity care levels. How can the program be serving low-income and uninsured Californians if the pharmacies are not even located in their communities?

There is a persistent lack of transparency around how 340B savings are used, and the growing disconnect between those funds and direct patient benefit. Too often, the patients most in need never see the program’s intended impact.

As a result, Black and Latino patients may continue to experience higher rates of unmet medical needs, compounded by financial strain and reduced access to essential medications. Ultimately, health inequities in these communities are exacerbated.

Unfortunately, California legislators are now considering Assembly Bill 1460, authored by Assemblymember Chris Rogers, D-Santa Rosa, that would allow for uncontrolled abuse of the program, with no benefit to patients.

While the bill claims to protect access to the 340B program by allowing clinics to contract with pharmacies without any restrictions, in practice, it removes all safeguards. Pharmacies located out of state or in affluent areas can participate, with no requirements to serve low-income or underserved communities in California. (For example, a for-profit pharmacy owned by a pharmacy benefit manager in Florida could still profit from California patients under this bill.)

AB 1460 includes nothing that would increase transparency or require that 340B funds be used to help patients. It won’t combat issues with 340B in California and will instead embolden these entities to keep cashing in at the expense of patients.

Without proper oversight, 340B has strayed from its mission. The specific communities this program was designed to help are being left behind while patients and taxpayers bear the cost.

California lawmakers should vote no on AB 1460 and instead focus on patient-centric reforms that help vulnerable and low-income patients better manage their health.

This story was originally published May 7, 2025 at 5:00 AM with the headline "A broken federal program leaves Black Californians behind while corporations profit | Opinion."