Imagine a program designed specifically to help low-income and uninsured patients afford lifesaving medications — a program where drug manufacturers agree to sell medications at steep discounts, with the explicit understanding that the savings flow to the people who need them most.

Now imagine that hospitals have quietly turned that program into a revenue engine worth hundreds of billions of dollars, with little to no evidence that the savings ever reached patients.

That is not a hypothetical. That is what Congress heard this week.

At Tuesday's House Ways and Means Committee hearing on rising healthcare costs, Chairman Jason Smith put a number on it that should stop every patient in America cold: since the Affordable Care Act, hospitals have received $290 billion in discounts through the 340B Drug Pricing Program. Two hundred and ninety billion dollars in discounts, intended to help vulnerable patients afford their medications.

And study after study has found little evidence those savings made it to the patients the program was designed to serve.

What Is 340B, and Why Does It Matter to You?

The 340B program was created in 1992 with a straightforward purpose. Drug manufacturers that participate in Medicaid must also sell outpatient drugs at significantly reduced prices — sometimes 25 to 50 percent below market — to certain hospitals and health centers that serve low-income populations. The intent was clear: help safety-net providers stretch limited dollars further, and pass those savings on to underserved patients.

For years, the program worked roughly as intended, operating at a modest scale among a limited number of qualifying providers. But as hospital systems grew larger, more sophisticated, and more aggressive in their approach to revenue, 340B became something else entirely — a financial windfall exploited at scale, at the expense of the very patients it was meant to protect.

The scale of that transformation is staggering. The program has ballooned from a relatively small initiative into one of the largest pharmaceutical subsidy programs in the country, with hospitals receiving those $290 billion in discounts over roughly a decade.

Where did the money go? That is the question Congress is now demanding answers to — and the hospital executives called to testify this week did not have satisfying ones.

The Double-Dip: How Urban Giants Are Gaming Rural Programs

The 340B problem does not exist in isolation. It is part of a broader pattern that Chairman Smith laid out in stark terms during his opening statement: large, wealthy hospital systems have become extraordinarily sophisticated at identifying and exploiting every available financial loophole, often at the direct expense of the rural and low-income communities these programs were designed to help.

One of the most egregious examples involves what the Chairman described as "reclassification" — urban hospital systems designating themselves as rural providers in order to access benefits reserved for truly rural safety-net hospitals.

The numbers tell the story. The designation of "rural referral center" — which confers eligibility for enhanced 340B access, higher residency training funding, and other financial benefits — has exploded from just three hospitals in 2017 to 425 by 2023. That is a 14,000 percent increase in six years.

What changed? The financial incentives became clear, and large systems moved to capture them.

The committee pressed this point directly with Dr. Brian Donnelly, the new CEO of New York Presbyterian — one of the nation's most prestigious and financially robust academic medical centers, located in Midtown Manhattan. Under CMS rules, New York Presbyterian holds a rural referral center designation, entitling it to the associated benefits.

When asked to justify that designation, Dr. Donnelly acknowledged that the hospital is not geographically rural, while noting that the system receives referrals from rural patients and trains residents who sometimes go on to practice in rural areas. The committee was unpersuaded. Of New York Presbyterian's 2 million annual patient visits, approximately 8,000 involve rural referrals.

Meanwhile, a truly rural hospital in Salem, Missouri — reimbursed at 4 percent below the national average — is fighting to keep its doors open. New York Presbyterian is reimbursed at 40 percent above the national average.

This is not a technicality. This is a resource transfer, from the communities that need these programs most to the institutions that need them least.

The Nonprofit Bargain That Patients Are Losing

The 340B story connects to a larger accountability question that the committee is increasingly focused on: what do patients actually get from the tax-exempt status granted to so-called nonprofit hospital systems?

Nonprofit hospitals receive an estimated $28 billion per year in tax exemptions. In exchange, they are expected to provide community benefit — including charity care for uninsured and underinsured patients — that justifies that public subsidy.

The math, according to the committee, does not add up. Tax-exempt hospitals are spending roughly $16 billion annually on charity care — billions less than the value of the tax breaks they receive. The gap is real money, public money, that is not reaching patients.

Where does it go instead? The hearing offered some answers. Stadium naming rights. Real estate investments. Green energy initiatives. Political spending. And, in the case of at least one large system, board meetings held in Europe and Canada — a detail submitted to the record with the relevant IRS 990 form.

None of that is illegal. But it raises a question that patient advocates have asked for years: if a nonprofit hospital consistently delivers less in community benefit than it receives in public subsidy, what exactly is the public getting from the arrangement?

What This Means for Your Drug Bill

For patients, the 340B issue is not abstract. It connects directly to the prices you pay at the pharmacy counter and on your hospital bills.

Here is the mechanism: when hospitals acquire 340B-eligible drugs at steep discounts and then bill patients or insurers at or near full price, they capture the spread. In some cases, that spread is substantial — the difference between a deeply discounted acquisition cost and a full retail or near-retail billing rate. The hospital profits. The insurer pays. And eventually, those costs flow through to premiums, copays, and out-of-pocket maximums that patients bear.

The committee also heard testimony that hospital manipulation of the 340B program has directly contributed to higher premiums in the Affordable Care Act marketplaces — meaning that patients who purchase individual coverage may be paying more because of how hospitals have structured their 340B operations.

This is the kind of systemic cost driver that rarely shows up on an explanation of benefits. It does not appear as a line item on your bill. But it is embedded in the prices you pay.

What Needs to Change

The 340B program is not beyond saving. But saving it requires meaningful reform — the kind that hospitals have consistently and aggressively lobbied against.

At minimum, reforms should require that 340B discounts produce a demonstrable benefit for the low-income patients the program was designed to serve. Hospitals should be required to document and report how 340B savings are used. The rural designation loophole — which has allowed urban systems to claim rural benefits at scale — needs to be closed. And charity care provided by tax-exempt systems should be meaningfully measured against the public subsidy those systems receive.

None of this is radical. It is accountability.

The patients who are charged full price for medications while their hospital quietly purchases those same medications at a 50 percent discount deserve to know that. They deserve a program that actually works for them, not one that has been optimized to work for the institutions administering it.

The Ways and Means Committee's hearing this week was a necessary step. The question now is whether it produces action — or whether the lobbying power of large hospital systems once again buries reform before it can reach the floor.

Patients Rising will be watching. And we will be asking you to help us push.

READ ON: If you think this is just about one program, it’s not—this is part of a much larger story about how hospital systems are reshaping American healthcare. Read the next piece: The Two Americas of Hospital Care—and How Systems Exploit the Divide.

Have you been charged full price for a medication while your hospital participates in 340B? Share your story with us. Your experience matters — and it helps us hold the system accountable.

Follow @PatientsRising on social for continued coverage of the Ways & Means Committee's healthcare affordability investigation.