“When a program designed to deliver targeted assistance drives up system-wide costs, reform is no longer optional,” says health expert Sally Pipes. “It’s necessary.”
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If a charity organization collected billions of dollars with little evidence that needy people benefited, regulators and the public would quickly demand answers.
Yet many large hospital systems participating in the federal 340B Drug Pricing Program are quietly doing just that—extracting billions in drug discounts with scarce oversight and no obligation to prove vulnerable patients benefit.
That should alarm anyone concerned about rising healthcare costs, misuse of taxpayer dollars, financial burdens on employers, or the integrity of our nation’s safety net. Congress must stop ignoring this problem and inject some badly needed transparency into 340B.
Data show that hospitals—not the patients 340B was meant to serve—are capturing the program’s benefits. In Minnesota, hospitals captured roughly 98% of net 340B profits in 2024, according to one report. In Illinois, hospitals’ 340B revenues were more than 2.5 times what they spent on care for low-income and uninsured patients in 2022.
Such misuse has become rampant largely because policymakers and regulators lack access to the routine data 340B providers already collect. Without that data, it’s almost impossible to determine whether the program is achieving its intended purpose.
Programs of this size and importance typically come with clear rules, consistent reporting, and measurable outcomes. With 340B, those guardrails are largely absent.
The program requires manufacturers to give safety‑net providers steep discounts on outpatient drugs. Providers can then bill insurers at higher rates, with the expectation that they use the difference to support care for low‑income and uninsured patients.
But there are no requirements that hospitals actually use the profits that way—or even pass the discounts along to patients at the pharmacy counter.
With so little federal oversight, hospitals are using the program as an unchecked profit stream. Providers have sharply expanded their use of discounted drugs, with 340B purchases ballooning from $6.9 billion in 2012 to more than $80 billion in 2024. The program is now the second-largest federal prescription drug program after Medicare Part D—a striking shift for what was once a narrowly targeted safety-net policy.
When hospitals overcharge insurers for drugs they bought at deep 340B discounts, taxpayers, employers, and insured patients foot the bill. One analysis found that these markups cost state employee health plans roughly $1 billion annually.
The program’s design also incentivizes providers to prescribe more expensive drugs, since higher list prices mean bigger 340B discounts. That dynamic drives up drug costs across the healthcare system. The nonpartisan Congressional Budget Office concluded that 340B encourages behaviors that “tend to increase federal spending because they lead to higher prices or an increased use of drugs.”
When a program designed to deliver targeted assistance drives up system-wide costs, reform is no longer optional. It’s necessary.
The Trump administration proposed a pilot program last year that would have required 340B entities to demonstrate that drugs are truly eligible for the program before receiving a discount. Hospitals quickly pushed back, and the pilot was blocked in court.
The administration is now revisiting the idea, seeking input on a rebate-based model that would create a clearer record of how the program is used for select drugs.
That’s a positive development. But the delay—and the narrow scope of the proposal—has led some drug manufacturers to act on their own. Some have begun requiring providers to submit claims-level data to verify that medications dispensed to patients after an appointment are actually eligible for 340B.
While constructive, these efforts won’t restore integrity to the program by themselves. Without comprehensive legislative reform, 340B will remain plagued by abuse, opacity, and uneven enforcement.
At a minimum, Congress must impose basic transparency measures that are standard in other federal health programs, including claims-level reporting and clear documentation of how each provider spends its 340B revenue.
Policymakers should also establish stricter standards and increase audits to verify that each 340B provider serves low‑income patients and meets a minimum charity care threshold before receiving discounted medicines.
These commonsense accountability measures would bring 340B in line with the expectations that govern other large federal programs. They’d also help ensure that the program’s substantial financial benefits are directed toward the patients who need them most.