Lori Reilly, Chief Operating Officer of the Pharmaceutical Research and Manufacturers of America (PhRMA), has raised concerns about the misuse of the 340B program by large urban hospitals. She claims these hospitals are reclassifying themselves as rural providers to exploit benefits meant for rural communities. Reilly urged Congress to consider reforms, making her statement on X.
"Big, urban hospitals are exploiting 340B—reclassifying as “rural” to grab drug discounts meant for providers treating underserved patients," said Reilly. "Congress should fix the 340B hospital markup program and hold hospitals accountable."
Congress is currently engaged in discussions regarding potential reforms to the federal 340B drug pricing program. This initiative was originally designed to assist hospitals serving low-income patients by providing access to discounted medications. According to the Senate Health, Education, Labor, and Pensions (HELP) Committee, lawmakers such as Senator Bill Cassidy have expressed concerns that the program has deviated from its intended purpose. They argue that while hospitals benefit from discounts, insurers and patients continue to pay full prices. Recent hearings have centered on enhancing transparency, redefining eligible patients, and addressing allegations that urban hospitals are exploiting provisions meant for rural facilities.
According to reports from the Commonwealth Fund and the House Ways & Means Committee, as of 2023, more than 53,000 care sites linked to approximately 42,000 covered entities were participating in the 340B program. However, oversight remains limited. It has been noted that many so-called "rural" hospitals are actually situated in urban areas; specifically, 82% of rural referral centers operate in cities and primarily serve urban populations. This situation has led to concerns about urban hospitals reclassifying themselves to qualify for benefits intended for rural communities.
Studies indicate that while 340B discounts provide significant financial relief and expanded service capacity for hospitals, these benefits are not evenly distributed. A scoping review conducted in 2023 found that although hospitals often used revenue from these discounts to expand services, there was mixed evidence regarding whether funds directly benefited low-income patients. Furthermore, a 2024 analysis reported by the National Institutes of Health (NIH) and Dobson DaVanzo highlighted that disproportionate share hospitals within the 340B program comprised 35% of facilities but accounted for 58% of uncompensated care—emphasizing their role as safety nets.
Reilly's background includes over two decades in senior leadership roles at PhRMA, where she specializes in pharmaceutical policy and health regulation advocacy strategy. Her work involves shaping industry responses to federal drug pricing reforms and extensive involvement in biopharmaceutical research policy.
