Neal Masia, an adjunct professor of business and economics at Columbia University, said that recent research suggests the expansion of the 340B Drug Pricing Program is being driven primarily by large teaching hospitals rather than smaller community-based providers.
Created to help eligible safety-net providers stretch federal resources and serve more patients, the 340B program has grown into one of the largest federal drug-purchasing channels. Covered entities purchased $81.4 billion in outpatient drugs through the program in 2024, according to the Health Resources & Services Administration.
"Participating entities purchased $81.4 billion in medicines in 2024, a 23% increase over the previous year and a whopping twelve times the size of the program in 2010. The growth begs the question – where are the tens of billions of dollars generated by this program coming from, and where are they going? Effectively, 340B has become a drug mark-up program. Hospitals buy drugs at low cost and sell them high – and are incentivized to do so as often as possible," Masia said, according to RealClearHealth.
Masia also questioned whether the program’s expansion is translating into greater patient benefit.
“340B is not correlated with a positive impact on charity care. More than half of 340B hospital systems have rates of charity care below the national average of 2.15% of operating expenses. There are no limitations on how hospitals use the money they reap from 340B and no reporting requirements,” he said.
That revenue structure, according to RealClearHealth, has allowed large hospital systems to scale up participation by expanding off-campus treatment sites and contract pharmacy networks, increasing prescription volume across wider geographic areas. That expansion has intensified competition for smaller hospitals and clinics that lack the same infrastructure.
The growth of the program has also drawn scrutiny from federal watchdogs. The Government Accountability Office (GAO) reported in late 2025 that the Health Resources and Services Administration had implemented only five of 20 recommendations related to 340B oversight, leaving unresolved issues involving contract pharmacies, eligibility determinations, and how discounts interact with Medicaid rebates.
Those interactions remain a concern because they can create situations where manufacturers are effectively required to provide both a 340B discount and a Medicaid rebate on the same drug. The GAO has noted that enforcement has been inconsistent due to data limitations and oversight gaps, despite statutory prohibitions on duplicate discounts.
Neal Masia, a health economist, is an adjunct professor at Columbia Business School and has held roles in academia, industry, and policy. He previously spent nearly 18 years at Pfizer, including as chief economist and vice president of patient and health impact, and has also worked at the Congressional Budget Office.
