Stephen Parente, founding director of the Health Economists and Academic Leaders (HEAL) Network, said on May 4 that while the 340B Drug Pricing Program was designed to help safety-net providers serve vulnerable patients, its current structure allows large hospital systems and intermediaries to capture significant financial gains.
“The program has grown into something far different — an opaque revenue engine for large hospital systems and for-profit companies, with little evidence that patients are seeing the intended benefit," Parente said in comments published to The Well News.
"Federal law does not require hospitals to track or report how 340B profits are used, and independent analyses suggest that many nonprofit hospitals already spend less on charity care than the value of their tax exemptions. Studies have linked 340B participation to higher outpatient spending and consolidation trends that ultimately raise costs for employers and patients. Meanwhile, patients often see none of the discount," he added.
The topic has drawn increased scrutiny as the 340B program has expanded into a major segment of the prescription drug market, raising questions about whether its benefits are reaching the patients it was intended to support.
The 340B Drug Pricing Program allows eligible hospitals, health centers, Ryan White clinics, state AIDS drug assistance programs, and other safety-net providers to purchase outpatient drugs at significantly reduced prices. Its stated purpose is to help covered entities stretch limited federal resources, expand care to more eligible patients, and provide additional services, according to the Health Resources & Services Administration (HRSA).
In 2024, discounted purchases under the program reached $81.4 billion, up from $66.3 billion in 2023. According to HRSA, growth has been concentrated in outpatient drug spending and specialty medicines, including oncology and immunology treatments.
Federal oversight of the program has identified ongoing concerns, including monitoring of contract pharmacy arrangements, eligibility standards for certain nonprofit hospitals, and interactions between 340B discounts and Medicaid rebates. The U.S. Government Accountability Office has noted that these gaps present challenges for program integrity as the scale of discounted drug purchasing continues to grow.
Parente is the founding director of Health Economists and Academic Leaders Network, which focuses on applying economic research to healthcare policy debates at the federal and state levels. He is also a professor at the University of Minnesota Carlson School of Management, where his work centers on health economics, insurance markets, and healthcare finance.
