Joe Grogan, former director of the Domestic Policy Council under the Trump administration, has raised concerns about nonprofit hospitals and pharmacy benefit managers misusing the 340B drug discount program. He claims this misuse is harming small pharmacies.
"There are a lot of government programs that have gotten out of control," said Grogan. "340b is Exhibit A. Nonprofit hospitals are using this program as a ‘get rich quick' scheme. PBMs are exploiting the program, manipulating prices, pushing small-run pharmacies out."
According to the Health Resources & Services Administration (HRSA), the 340B Drug Pricing Program, established in 1992, allows eligible healthcare organizations to purchase outpatient drugs at significantly reduced prices to help them stretch limited federal resources. The program is designed to support care for underserved populations. However, concerns have arisen over whether some covered entities are using the savings from the program as intended.
A 2023 report from the Medicare Payment Advisory Commission (MedPAC) highlighted that hospitals participating in the 340B program often earn significant margins on drugs, particularly oncology drugs. This has raised concerns that the program's benefits may be contributing to provider consolidation and the acquisition of medical practices. Policymakers are scrutinizing whether these margins align with the original mission of the 340B program.
A 2018 study published on NCBI examined the impact of the 340B Drug Pricing Program on hospital-physician consolidation. The authors found that participation in the 340B program was linked to an increased likelihood of hospitals acquiring physician practices, particularly in oncology. The study reported a significant rise in the number of hematologist-oncologists and ophthalmologists at hospitals after they joined the 340B program.
Grogan currently serves as Chairman of the Board at the Paragon Health Institute and is a Fellow at the USC Schaeffer Center. He previously held positions including Assistant to the President and Director of the Domestic Policy Council and Associate Director for Health Programs at the Office of Management and Budget.
