President Donald Trump has repeatedly vowed to “cut waste, fraud and abuse everywhere that we can find it.” Congressional Republicans now have an opportunity to help him achieve that goal by supporting the administration’s efforts to stop hospitals from abusing a little-known federal charity care program.
Congress originally created the program, known as 340B, to help safety-net hospitals care for low-income patients. Lawmakers required drugmakers to sell heavily discounted medicines to these hospitals, with the expectation that the hospitals would pass the discounts on to patients or use the extra funds to provide more charity care.
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Unfortunately, large hospital conglomerates have used a series of legal loopholes to take advantage of the program by overcharging patients and indirectly shifting costs onto employers and taxpayers.
CORPORATE HOSPITALS ARE DRIVING UP HEALTHCARE COSTS FOR THE REST OF US
Over the past three decades, the program has expanded far beyond lawmakers’ original expectations. They initially anticipated that about 90 hospitals would enroll. Now, several thousand hospitals have exploited loose eligibility requirements to participate — and many of them aren’t even in the low-income neighborhoods Congress hoped to help.
Yet Congress didn’t explicitly require that these providers pass on the savings to patients — so many of them don’t. Many 340B hospitals actually provide far less charity care than they earn from the program. Instead, they’re pocketing the profits.
These hospitals buy discounted drugs and sell them at steep markups — sometimes for more than 10 times their acquisition cost.
340B spending has skyrocketed in recent years, with discounted drug purchases increasing from about $4 billion in 2009 to over $81 billion in 2024.
These hospitals aren’t just depriving patients of much-needed discounts. They’re also cheating taxpayers, employers, and the federal government out of billions of dollars.
One analysis found that state employee health plans — which taxpayers fund — lose at least $1 billion from 340B hospitals’ upcharges each year. The 340B program increases all employers’ health spending by about $36 billion annually at a time when Americans need cost-of-living reductions. And by shifting revenue from taxpaying drugmakers to tax-exempt hospitals, 340B could cause the federal government to lose out on $200 billion over the next decade.
To curb the rapid growth of the program — and prevent widely suspected fraud — the Trump administration is laying the groundwork for a pilot program that would change the way 340B operates. The pilot would require drug manufacturers to provide rebates to 340B hospitals after they dispense a drug. In order to receive a rebate, hospitals would have to submit documentation proving that the prescription qualified for 340B pricing.
Currently, hospitals receive up-front discounts before they ever dispense a drug — so there’s no way to prevent hospitals from accidentally, or deliberately, routing prescriptions that don’t qualify for 340B pricing through the program anyways.
The change wouldn’t prevent qualifying hospitals from getting discounted drugs, but it would make it harder for hospitals to get discounts they’re not entitled to under the law. The current lack of transparency practically invites fraud — and has fueled 340B’s explosive growth that increases healthcare costs for patients, employers, and taxpayers. The administration’s proposal could provide a quick and meaningful reduction in those healthcare costs.
HOSPITALS ARE A PRIME SUSPECT IN THE AFFORDABILITY CRISIS
So far, the Trump administration has done all the heavy lifting, even reworking the pilot program after a court initially halted implementation on a procedural technicality. Now, it’s up to congressional Republicans to see it across the finish line. They’ll have to block Democrats from inserting a provision in the next annual appropriations bill that would defund the Trump administration’s pilot program before it even begins.
Trump and congressional Republicans promised to fight waste, fraud, and abuse. The public is asking for lower healthcare costs. The White House is doing its part. It’s time for Trump’s allies on Capitol Hill to do the same.
Chase Martin is the chairman of American Resolve Action.
