President Trump and his administration are pushing ahead with a reform that could prevent billions of dollars in annual waste, fraud, and abuse. And it could start saving taxpayers money as soon as January -- progress, by Washington standards -- as long as congressional Republicans don't undermine him.
The reform would introduce much-needed transparency to the 340B Drug Pricing Program, a once-obscure federal initiative that has grown so large, it's driving inflation across the healthcare sector.
Congress created 340B to help a few dozen safety-net hospitals provide more charity care. The program allows hospitals and clinics to buy drugs from manufacturers at a discount, thus enabling participating hospitals to stretch limited resources and expand access to care for low-income and uninsured patients.
Yet, like many other well-intentioned federal programs, 340B has grown far beyond lawmakers' original purpose. Thousands of hospitals now participate, nearly 30 times the number policymakers originally envisioned. Collectively, hospitals and other program participants secured an estimated $66.4 billion in drug discounts in 2024 alone.
Federal law doesn't require hospitals to pass these discounts on to patients or boost the amount of charity care they provide. Hospitals can simply pocket the savings. Nearly nine in 10 safety-net hospitals generate more revenue from 340B than they provide in charity care, according to a 2024 report.
In fact, they often boost their own profits by needlessly using more expensive drugs, even when cheaper ones would work just as effectively. These hospitals charge patients nearly 10 times what they paid to acquire the drugs, inflating patients' out-of-pocket costs and driving up premiums for the nearly half of Americans who get health insurance through their employers.
The program's lack of guardrails has far-reaching fiscal consequences. 340B hospitals raise taxpayer spending when they mark up drug prices for seniors on Medicare. And a former director of the Congressional Budget Office has estimated that 340B abuse could deprive the federal government of $200 billion in tax revenue over 10 years by transferring money from drug manufacturers that pay corporate taxes to tax-exempt hospitals.
To combat waste, fraud, and abuse, the Trump administration is laying the groundwork for a pilot program that'd change the way hospitals purchase discounted drugs through 340B.
Currently, hospitals claim 340B discounts up front, leaving the government with no way to track how those drugs are used or whether the purchases are eligible for 340B pricing.
Under the administration's reform, hospitals would instead purchase drugs at standard prices and receive rebates only after demonstrating that the purchases actually qualify for the 340B program.
That change would, for the first time, enable policymakers to track how 340B discounts are used and prevent hospitals from deliberately obtaining discounts they're not entitled to under federal law. It would introduce transparency to a system that has long functioned as a black box.
Hospital executives, predictably, are howling with outrage, just like the blue state officials who squealed when the Trump administration began investigating, and subsequently found, billions of dollars of healthcare fraud.
There's no telling how much fraud the administration could uncover with this 340B reform. But based on how desperate hospital executives are to block transparency measures, we can be certain the amount isn't zero.
Hospitals already sued to stop the administration from moving forward with a similar pilot program last year, and the courts sided with the hospitals on narrow procedural grounds, ruling that the administration did not follow the proper protocols to roll out the reform.
Now, the Trump administration is trying again, and making sure to scrupulously follow the correct procedures.
Knowing that the courts will allow the pilot to proceed this time, hospital lobbyists, who hold significant sway over Democrats and some Republicans, are mobilizing to defund the reform before it goes into effect. Hospitals recently convinced 79 Democrats, along with 15 House Republicans, to announce their intent to strip funding for the pilot program.
This betrayal by a relative handful of House Republicans is outrageous. The Trump administration is working hard to root out waste, fraud, and abuse that drives up Americans' healthcare costs. The president deserves the support of every Republican in that effort.
West Cuthbert is a Senior Fellow at American Resolve Action.
