On February 9, 2018 the White House Council of Economic Advisors issued a White Paper on “Reforming Biopharmaceutical Pricing at Home and Abroad.” The White Paper identified the 340B program as a source of “arbitrary underpricing”, which if curtailed, could “help to realign incentives for pharmaceutical firms to innovate.” The White Paper alleges that there are two significant problems in the 340B program:

(1) “imprecise” eligibility criteria and

(2) “providers earn significant profits from qualifying for the program, which can be used to fund other forms of care or shareholder’s dividends rather than provide care for low income patients.”

Statements about profits and dividends demonstrate a misunderstanding of 340B eligibility criteria. Virtually all 340B covered entities are nonprofits, so there are no shareholder dividends and revenues must be used for the nonprofit’s charitable mission. As part of its recommendations, the White Paper suggested restricting “eligibility of lower priced drugs to intended poor patient populations.” It also endorsed the Medicare Part B rule reducing payment to hospitals for 340B drugs.