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The Hospital of the University of Pennsylvania recently received $86 million as a part of a legal settlement from the federal government. Credit: Shreya Sharma

The Hospital of the University of Pennsylvania will receive $86 million from the federal government due to a legal settlement pertaining to the 340B drug pricing program. 

Established in 1992, the 340B program aids safety-net hospitals serving low-income individuals. The settlement for HUP is the sixth-largest payment to any hospital in the nation, according to The Philadelphia Inquirer. 

The program lets certain hospitals serving many low-income patients to buy drugs at discounts of around 30% to 40%. The hospitals sell the drugs at full price to insurers and Medicare, pocketing the difference.

Initially, the 340B was set up for 50 hospitals and several clinics to assist the financially vulnerable. However, after the 2010 Affordable Care Act under Former United States President Barack Obama, its scope broadened. Now, hospitals in the program can maintain discounts from a more extensive network of pharmacies.

As of January, over 2,600 hospitals were part of the 340B program, the U.S. Government Accountability Office reported. 78% of the program is catered towards hospitals like HUP, Temple University Hospital, and Thomas Jefferson University Hospital. 

The expansion of the program has sparked concerns. Critics argue that it's veered away from its foundational purpose and now acts as a significant profit source for nonprofit hospitals. Through the 340B program, hospitals can avail discounts for nearly all patients without necessarily giving these savings to the patients. They aren't even mandated to disclose how they utilize these savings.

In the last fiscal year, Penn Medicine told the Inquirer a saving of $717 million through the 340B program. This figure is almost on par with the $734 million cash the health system earned in that period.

University of Pennsylvania Health System CFO Keith Kasper said to the Inquirer that significant changes, like alterations in insurance contracts and Medicare reimbursements, will necessitate adjustments to guarantee their long-standing stability.