For millions of American families, health care has become a kitchen-table crisis -- not because care is unavailable, but because it is increasingly unaffordable. Premiums keep rising, deductibles are swallowing paychecks, and surprise medical bills are draining already‑thin family budgets.
One little-known federal program is quietly making that affordability crisis worse despite its original intent to broaden access to affordable care.
Under the 340B Drug Pricing Program, hospitals are pocketing billions in federal drug discounts -- while patients see little or no relief at the pharmacy counter.
When Congress created 340B in 1992, the goal was straightforward: help eligible hospitals stretch scarce resources and expand care for low‑income and uninsured patients. Lawmakers allowed hospitals to purchase medicines at steep, federally-mandated discounts, with the expectation they would reinvest those savings into free and discounted care for underserved communities.
Today's 340B bears little resemblance to that intent. Lacking sufficient guardrails on participation or the use of savings, the program has expanded exponentially in size and scope -- sending ripple effects through employer-sponsored coverage, Medicaid spending, and patients' out-of-pocket costs.
New data show 340B purchases exceeded $81 billion in 2024 -- up roughly 23% from the year prior -- and now make up nearly one-fifth of all U.S outpatient drug spending. Over time, more entities have positioned themselves to capture 340B dollars.
Hospitals are at the center of this growth. In 2004, just 149 disproportionate-share hospitals participated in 340B -- by 2023, that number surged to 992. These hospitals now account for more than three-quarters of all 340B drug purchases, even though many serve relatively few low-income patients.
The program's structure incentivizes hospitals to treat 340B as a profit opportunity. Hospitals can acquire drugs at steep 340B discounts, then bill insured patients, employer plans, and Medicaid managed care at full prices. The larger the spread between the discounted acquisition cost and the reimbursement rate, the larger the margin for hospitals. That dynamic rewards higher-priced drugs and encourages hospitals to route more prescriptions through 340B-eligible sites.
Rather than expand charity care or improve access with the revenue generated, many hospitals plow their earnings into financial investments.
A recent study found that within five years of joining 340B, participating hospitals nearly doubled the funds they held in stocks, bonds, and other investment instruments -- increasing their financial holdings from around $364,000 to more than $688,000 per bed. The equivalent of nearly one-third of every 340B dollar was routed into investment portfolios rather than services for vulnerable patients.
Meanwhile, spending on uncompensated care -- including charity and uninsured care -- per bed fell by 22%, and staffing levels barely budged. Hospitals that joined 340B more recently have routinely provided less uncompensated care than early entrants, and all cohorts have steadily reduced charity care commitments since 2015. In practice, the entities expanding most aggressively into 340B are often the least connected to its safety-net mission.
It's time Congress realigned 340B with its original purpose -- beginning with clear expectations for how savings must be used. Hospitals receiving deep discounts should be required to demonstrate that those dollars reduce patients' out‑of‑pocket costs, expand access to care, and directly support community health needs. Eligibility should also be tightened to limit participation to hospitals that genuinely function as safety‑net providers.
Lawmakers have an opportunity to restore integrity to 340B -- and to ensure that federal drug discounts benefit patients, not hospital investment portfolios.
Dr. Lisa Grabert is a visiting research professor at Marquette University. She previously served as a senior aide to the U.S. House Committee on Ways and Means and as senior associate director of policy at the American Hospital Association.
