The Trump administration is considering a pilot program that could bring much-needed transparency to the 340B drug discount program, created by Congress to help hospitals and clinics serving low-income patients provide medications at discounted rates.
Under the 340B program, drug manufacturers provide medicines at steep discounts, which providers are supposed to pass on to vulnerable patients. Instead, large hospitals repeatedly take the manufacturer discount, bill patients and insurers at full price, and pocket the difference. And because the program lacks meaningful reporting requirements, hospitals generally do not have to demonstrate how those savings are spent or whether patients are directly benefiting.
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Both the administration and manufacturers are looking for ways to bring 340B back to its intended purpose of helping low-income patients access medicines, but the hospital lobby has responded to transparency efforts with swift and significant opposition.
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Earlier this year, the administration proposed a pilot program that would have drug manufacturers replace upfront discounts with after-the-fact rebates for a limited set of products, bringing savings back to patients. The effort was blocked, but the administration is preparing for a second launch attempt. In response to this attempt, 340B Health, the association representing participating hospitals, argues that rebate models would disrupt cash flow, increase administrative burdens, and create uncertainty for safety-net providers.
The irony is that the loudest complaints are coming from large, well-resourced hospital giants, not small providers.
These hospitals are not only fighting the administration’s efforts — they are also resisting attempts to determine where the program’s billions of dollars in discounts go. Manufacturers recently issued a notice that 340B hospitals must now provide simple claims-level data that would confirm discounted drugs are reaching eligible patients and that the program is operating as intended. But some of the largest hospital systems have refused, arguing that providing claims-level data to manufacturers raises legal, privacy, and operational concerns.
The hospitals refusing to comply already collect and transmit similar claims data every day to Medicare, Medicaid, and commercial insurers. And thousands of smaller clinics and health centers have already sent this data to manufacturers, showing that the burden of compliance is far less daunting than large hospitals claim.
If hospital systems are using 340B discounts exactly as Congress intended, why are they resistant to providing the data that would prove it? And if they are passing savings along to patients, why would a rebate program be any more burdensome than an upfront discount?
The truth is that, over time, the 340B program has evolved into an opaque revenue stream that acts as a growth strategy for large hospital systems. The Congressional Budget Office found that 87% of spending on drugs purchased through the 340B Prime Vendor Program in 2021 occurred in hospital outpatient departments and their affiliated off-site clinics, underscoring how heavily the program has become concentrated among hospital systems.
Researchers and policymakers have noted that the program can create incentives for hospitals to acquire physician practices and outpatient clinics, bringing more sites under the 340B umbrella and generating additional discounted-drug revenue. As care shifts into hospital-owned facilities, independent physicians struggle to compete, and patients often face higher costs because hospital outpatient departments are typically reimbursed at higher rates than physician offices for the same services.
The 340B program was created to support vulnerable patients, not subsidize hospital acquisition strategies or finance healthcare empires.
Neither manufacturers nor the administration is proposing to eliminate 340B. Instead, they are asking for verification that discounts are being used appropriately, eligible patients are benefiting, and the program is functioning as Congress intended.
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The program has grown from $6.6 billion in discounted drug purchases in 2010 to more than $81 billion in 2024, yet policymakers and taxpayers still have little visibility into how much of those savings ultimately reach patients.
A program that benefits needy patients should have no difficulty demonstrating that success. If 340B is working as intended, hospitals should show the data. And if they do have a problem providing that data, Congress should start asking whether 340B is still serving patients or, instead, funding hospital empires.
Joe Grogan is a nonresident senior scholar at the USC Schaeffer Institute and served as director of the White House Domestic Policy Council under President Donald Trump. He consults for pharmaceutical companies.
