Op-Ed: As healthcare costs climb, Illinois must take a closer look at 340B expansion

By MARK DENZLER
Illinois Manufacturers’ Association

For Illinois manufacturers and employers across the state, healthcare is not just a line item. It’s one of the fastest-growing costs of doing business. Rising premiums force difficult tradeoffs and influence hiring decisions, wage growth, capital investment, and long-term competitiveness.

That is why legislation under consideration in Springfield to expand the federal 340B drug pricing program warrants careful review, particularly given its growing impact on employer healthcare costs.

The 340B program was created to help safety-net hospitals and clinics expand access to care for low-income and uninsured patients. It allows eligible hospitals to purchase drugs at significant discounts and bill payers, like Medicaid and employer-sponsored insurance, full price.

That margin was intended to support charity care for patients. But there are no requirements for hospitals to pass 340B discounts to patients or report how profits are used.

What we do know is that when a 340B institution receives a discount on drugs, payers lose other negotiated discounts. For employers, which are the primary purchasers of health insurance, this dynamic creates a hidden but substantial cost burden.

Many Illinois businesses self-insure their health plans or share in the cost of employee coverage. In those arrangements, prescription drug discounts play a critical role in managing overall costs. When drugs are dispensed through the 340B program, hospitals get the discounts that would otherwise flow to employers with no real assurances that patients are benefitting from the program. Current estimates suggest that Illinois employers lose roughly $224 million annually in discounts to 340B, which translates into higher premiums, larger deductibles, and greater out-of-pocket costs for workers.

340B has expanded rapidly in Illinois, growing from 34 entities in 2010 to 114 today. It’s also exploding nationally, growing from a $1 billion program a decade ago to more than $66 billion today. This growth has been primarily driven by large hospitals expanding their footprints through off-site hospital-owned clinics and contract pharmacies. Much of this expansion has occurred in affluent areas with higher rates of insured patients, where the financial returns are greater.

That raises an important question for policymakers: If a growing 340B program is driving up costs without improving access or affordability for the patients it was designed to serve, what problem are we solving by expanding it further without meaningful transparency reforms?

Illinois has a strong interest in ensuring that safety-net providers have the resources they need. These institutions play a vital role in our healthcare system and in communities across the state. But expanding a program without clear accountability or transparency risks compounding existing challenges. In this case, those consequences include higher costs for employers, reduced affordability for workers, and growing financial pressure on the state’s healthcare system.

Employees are the greatest asset of any manufacturer, and ensuring those employees have access to affordable health insurance is critical.

But before moving forward with any expansion of 340B, lawmakers should consider whether this policy makes healthcare more affordable for Illinois families and job creators. The best course is to avoid codifying its current shortcomings into state law, and instead explore reforms that improve transparency, accountability, and alignment with its mission to expand access to care for vulnerable patients.

At a time when Illinois is competing for jobs and investment, controlling healthcare costs is essential. Our economic strength depends on a healthy workforce and a competitive business environment, and we should avoid policies that drive costs higher without delivering measurable benefits.

 

Mark Denzler is president & CEO of the Illinois Manufacturers’ Association.