340B Drug Pricing Program making health care more expensive

OPINION:

A government discount program you’ve probably never heard of is making health care more expensive.

The 340B Drug Pricing Program is a federal program that provides discounted medications to hospitals and clinics. It was supposed to help vulnerable, low-income and rural patients access prescription drugs, yet many hospitals don’t pass those savings on to patients. Instead, hospitals pocket the savings and charge patients full price.

Today, this “charity” program has become the health care industry’s most lucrative con job, and most patients don’t even know it exists. At $66 billion annually, the 340B Program is now the second largest prescription drug program in the United States behind only Medicare Part D. As the program has exploded, federal oversight has decreased. The Health Resources and Services Administration now audits a fraction of a percent of 340B covered entities to ensure compliance with federal law.

Hospitals have figured out how to game the 340B program in ways that aren’t serving the best interests of patients or vulnerable communities. A recent Senate investigation found that two hospitals generated more than $1 billion in 340B revenue over five years without passing the savings on to patients. Richmond Community Hospital (part of Bon Secours Mercy Health) brought in $276.5 million in 340B revenue from 2018 to 2023 without passing those savings on to their patients. Cleveland Clinic pulled in nearly $933.7 million over three years with no direct patient benefits.

It’s not just hospitals. Pharmacy benefit managers and third-party administrators siphon 340B funds by adding administrative fees and pharmacy service charges. Under an agreement with the Cleveland Clinic, CVS Health charges patients with insurance “dispensing fees” on brand-name prescriptions. These fees reach up to $85 per prescription. The same patients without third-party prescription insurance coverage pay a dispensing fee of just $15 on brand-name drugs.

CVS Health and Walgreens also add a third-party administrative services fee to their pharmacy services agreements. The Senate Committee on Health, Education, Labor & Pensions found these fees are “a significant revenue source for contract pharmacies,” generating hundreds of millions of dollars annually.

An October 2020 report found that contract pharmacies marked up prices by an average profit margin of 72% for 340B drugs, compared with just 22% for non-340B medicines.

As a result of these marked-up medications, hospitals and pharmacy benefit managers have focused on expanding their 340B businesses not in rural or needy communities that are the intended beneficiaries of the program but rather in affluent communities where they can generate higher profits. A JAMA Health Forum study found that the growth of 340B pharmacies was “concentrated in affluent communities.”

In addition to higher out-of-pocket costs, patients, employers and taxpayers are paying more through higher health insurance premiums. A 2025 analysis by IQVIA pegged the additional cost of 340B markups at $6.6 billion annually. State and local governments pay more than $1 billion in increased health care costs because of 340B program abuses. A separate analysis by the National Alliance of Healthcare Purchaser Coalitions put the bill even higher, at an astounding $36 billion annually in higher health care spending by employers.

America’s rural and low-income patients deserve better than corporate welfare masquerading as charity care. It’s time to fix 340B, and the solution is clear: Congress must tighten eligibility requirements, mandate that savings reach patients and establish meaningful audits with real consequences. Establishing meaningful oversight requires dramatically expanding the Health Resources and Services Administration’s audit capacity from the current 0.33% of entities to 29%, compared to Medicare’s 29% audit rate.

Patients deserve to know when they are receiving a 340B drug and what their hospital paid for it. That’s why Patients Rising has launched the “Patient’s Right to Know” campaign to advocate for patient-centered reforms that ensure the 340B program helps patients in need. We aim to increase transparency around the 340B program and ensure hospitals deliver on their promise to help patients who need it most. Every dollar of 340B savings should fund demonstrable patient benefits, including direct rebates, charity care or community health programs.

The biggest health care discount in America should reach the patients it was intended to help.

• Terry Wilcox is the co-founder and chief mission officer at Patients Rising, a nonprofit and nonpartisan patient advocacy organization.