OPINION:
The Senate Health, Education, Labor and Pensions Committee recently held a hearing on abuses in the 340B Drug Pricing Program. The program was created more than 30 years ago with good intentions: to help certain hospitals and clinics serving vulnerable populations buy outpatient drugs at a discount. Today, however, the program is plagued by waste, fraud and abuse, and politicians on both sides of the aisle are determined to reform it.
President Trump is taking action to restore oversight, patient focus and accountability to the program. He signed an executive order in April that called for significant changes to the 340B program, including site-neutral payment and drug price negotiation. The administration is also preparing to adjust hospitals’ drug reimbursements to better reflect their acquisition costs.
Mr. Trump’s leadership may be leading to action in Congress. A recent Senate investigation found that many covered entities generate hundreds of millions of dollars in 340B revenue yet provide little evidence that those savings lead to lower costs or expanded care for low-income patients. Sen. Bill Cassidy, Louisiana Republican and chairman of the Senate Health, Education, Labor and Pensions Committee, remarked, “This investigation underscores that there are transparency and oversight concerns that prevent 340B discounts from translating to better access or lower costs for patients.” Mr. Cassidy is working with the committee on legislation to address these long-held concerns.
In 2023, covered entities alone purchased roughly $66.3 billion in outpatient drugs under the 340 B program. A disproportionate share of hospitals captured roughly $44 billion in 340B profits in 2022, while contract pharmacies earned an additional $10 billion. Contract pharmacies extend the reach of the hospital, providing additional avenues for patients to access the medications they need.
The flip side of this is that they allow hospitals to buy and bill for more deeply discounted drugs while billing the government the nondiscounted rate for these drugs. The number of contract pharmacies participating in the program has exploded by more than 2,400% since 2010, creating a sprawling web of partnerships that few regulators can adequately track. More than 2,600 hospitals now participate, far beyond what lawmakers envisioned when the program was created to serve a limited group of safety net providers.
Major hospital chains and pharmacy benefit managers have deeply entrenched interests in the 340B contract pharmacy market. One analysis shows that large for-profit firms dominate contract pharmacies tied to the program this year. In 1992, Congress did not intend to create the second-largest drug program in the U.S. (only behind Medicare Part D), where hospitals purchase drugs at steep discounts and then bill private insurers at full price, capturing large margins that do not flow to patients.
Mr. Trump’s Senate allies are on the case. In Sen. Markwayne Mullin’s home state of Oklahoma, hospitals participating in the 340B program have been shown to benefit significantly from the discounts provided through the program. Health Resources and Services Administration data reveals that 58% of Oklahoma’s 340B hospitals fall below the national average for charity care and that the hospitals in the state earn 1.9 times as much from 340B as they spend on charity care.
This dynamic isn’t unique to Oklahoma. On a national level, nonprofit hospitals are not just skimping on charity care but are also providing less charity care than their for-profit counterparts. Oklahoma nonprofit hospitals have nearly 900 contract pharmacy arrangements (898 noted). More than half (56%) of those contracts involve out-of-state pharmacies, raising concerns about how and where discounts are being captured. In Alabama, a hospital participating in the 340B drug discount program purchased a lifesaving cancer medication for roughly $3,400 through the program’s special pricing.
However, when the same medication was provided to a patient, the hospital billed more than $25,000, capturing a profit of more than $20,000 on a single dose. Hospitals use their 340B status to acquire clinics and physician practices, leveraging the program’s discounts to dominate local markets while offering no measurable increase in charity care. Meanwhile, the pharmacy benefit managers and corporate chains tied to 340B contract arrangements are capturing revenue that was supposed to support community health.
Reform could not be more needed, yet states, including Republican-led states, are enacting policies aimed at frustrating Mr. Trump’s efforts. As of January, eight states had enacted laws inhibiting drug company restrictions on access to 340B discounts, and such legislation is under consideration in 20 additional states. Mr. Trump should make it clear that gaming the 340B program is over, and if drug companies and hospitals can’t come to a reasonable accommodation on this issue, the government will intervene.
The principle behind the 340B program remains sound: Vulnerable patients deserve access to affordable medications, but the current structure has turned a compassionate policy into a wasteful loophole. Without congressional action, the 340B program will continue to enrich the well-connected and leave struggling patients behind.
• Joe Grogan is a former director of the Domestic Policy Council and assistant to President Trump.
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