When Congress created a program to help low-income patients access affordable medicine, the expectation was simple: savings would go to the people who needed them most. More than three decades later, the scale of that program has increased significantly, and there are serious questions about where the savings are actually going. Rather than the safety-net providers the program was designed to support, large hospital systems (already supported by taxpayer dollars) have been the big winners of the 340B program. Taxpayers are picking up the tab for the program’s many failures and mission creep.
Created in 1992, the 340B program requires pharmaceutical manufacturers to sell prescription drugs at significant discounts to qualifying hospitals and clinics. The idea was straightforward: safety-net providers with limited resources would use those savings to stretch their dollars further and serve uninsured and low-income patients. The program’s small size was matched by an equally limited set of rules when Congress created it. However, lack of oversight and transparency requirements have weakened safeguards designed to keep the program aligned with its original mission.
When 340B launched, Congress anticipated roughly 90 hospitals would participate; today, more than 2,600 do. Annual 340B drug purchases have surged from in 2010 to more than in 2024, making it the second-largest federal prescription drug program behind Medicare Part D. This is no longer the modest safety-net initiative Congress envisioned. As currently constituted, it subsidizes institutions that look nothing like the safety-net providers the program was designed to support.
To understand why 340B is failing, it’s critical to examine how the program works. Hospitals purchase drugs at 340B discounts, then bill Medicare, Medicaid, and private insurers at or near full price. A Government Accountability Office (GAO) found that Medicare beneficiaries at 340B hospitals were prescribed more drugs, or higher-priced drugs, than beneficiaries at non-340B hospitals, a difference that did not appear to be explained by the hospital characteristics GAO examined nor patients’ health status. This points to deep-seated problems with the program’s financial incentive structure.
There is no requirement that 340B hospitals pass savings along at the pharmacy counter, document what they did with the profits, or prove they actually served the low-income populations the program was designed to help. In Minnesota, hospitals absorbed of net 340B profits in 2024, while federally qualified health centers and grantees, the entities with explicit affordability mandates, received just . In Illinois, 340B hospitals earned roughly more in program profits than they spent on charity care for low-income and uninsured patients, with statewide charity care levels falling below the national average.
When hospitals overcharge insurers, those costs do not disappear. They get passed to employers, state governments, and families through higher premiums and deductibles. An analysis by IQVIA found hospital markups cost state employee health plans—and taxpayers by extension—approximately . Participating entities are not even required to disclose how much 340B revenue they collect, let alone show it went to anyone in need.
After decades of rampant and unchecked growth, policymakers are starting to pay attention.
The Trump administration has taken steps to address the problem. In 2025, the Health Resources and Service Administration (HRSA) approved a pilot program that would have let drug manufacturers issue rebates instead of upfront 340B discounts, creating a clearer paper trail for how the program is used. But hospital groups sued. HRSA has again requested feedback on a pilot program, and it will soon become clear how that will proceed.
Policymakers on the Hill have also taken note, with several and Congressional hearings exploring the scale and source of the problem.
The 340B Program needs comprehensive reform. The steps the administration is taking to prevent waste and abuse are critical, but ultimately, Congress will need to pass meaningful program changes to ensure basic transparency and protect against abuse.
Patients in need deserve more than a poorly targeted program that enriches hospitals at taxpayer and patient expense. Congress built 340B to serve vulnerable patients. Strengthening oversight can help ensure those benefits reach the patients who need them most.
