A recent study found that a little-known federal program may be driving up union healthcare costs by as much as $416 million per year.
The 340B program was created more than 30 years ago to help safety-net providers serve low-income communities by offering prescription drugs at steep discounts. Over time, however, the program has expanded and evolved in ways that have led to unintended consequences. In 2023, 340B covered entities purchased $66.3 billion in discounted drugs under the program – all without ensuring those savings are passed along to the patients 340B was intended to serve.
In addition, the program has grown by double digits nearly every year for the past decade.
The effects of this growth ripple throughout the health system, and union workers have been among the hardest hit by these changes.
Rising costs connected to the 340B program are increasing financial pressure on union health plans. These hidden expenses quietly inflate costs and reduce benefits that workers depend on. For millions of skilled trade workers across the country, this situation threatens both their coverage and the long-term stability of union-run healthcare systems.
Many union workers, particularly those in the building trades, are covered by Taft-Hartley plans. These healthcare plans – which are jointly managed by unions and multiple employers – are established through collective bargaining agreements to provide health and pension benefits to union members working for multiple employers within the same industry.
A key advantage of Taft-Hartley plans is portability, which allows workers to maintain coverage when moving between jobs. This flexibility is especially important for those working in the construction and building trades where workers frequently move between job sites.
PILMA recently studied how these plans interact with the 340B program. The findings show that the program’s rapid expansion has created challenges for plan sponsors. They must navigate the complex overlap between 340B discounts and manufacturer rebates.
The study found that the program has increased drug spending by 4.7 percent per claim. When applied across the 5.2 million Americans covered by union health plans, this increase translates to approximately $416 million in additional costs each year.
These rising expenses are linked to the unchecked growth of the program, which continues to expand by 24 percent annually. As a result, union workers and their families face growing financial strain.
The 340B program has moved away from its original mission. Union health plans and their members can no longer absorb the hidden costs caused by the unchecked growth and inadequate transparency of this program.
Further, recent reports have found that some covered entities and contract pharmacies use the program to generate revenue without passing savings on to patients. In some cases, uninsured patients are charged the full price for drugs purchased at a discount.
Because 340B is governed by federal law, meaningful reform must come from Congress, not state legislatures, to ensure consistent rules across states and health systems.
As healthcare costs continue to rise, policymakers need to act now to ensure the 340B program supports vulnerable patients and communities without shifting costs onto workers and employers. Earlier this year, PILMA’s trustees adopted a resolution recommending Congress take the following steps:
- Clarify program eligibility and use of contract pharmacy arrangements
- Increase transparency regarding the revenues generated by covered entities, third- party administrators, and contract pharmacies through 340B
- Require reporting on how 340B savings are used to directly benefit vulnerable patients in underserved communities.
These reforms would help ensure that low-income patients truly benefit from the 340B program while supporting the mission of safety-net providers and improving transparency and accountability.
Read more about the role of 340B in managing healthcare costs for Taft-Hartley plans by exploring the full study and PILMA’s new fact sheet outlining the key findings.
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