340B Reform: Accountability & Transparency

The Ultimate Guide to the 340B Drug Pricing Program

Quick Guide: 340B at a Glance

• Overview: The 340B Program was supposed to help vulnerable patients afford their medications.
• The Problem: 340B is no longer delivering on its promise to help patients.
• Patient Impact: As a result of the 340B abuses, patients are experiencing:
  • Higher bills at the pharmacy counter.
  • More expensive healthcare costs.
  • Restrictions on pharmacy choices
  • Requirements to use out-of-state pharmacies.
  • Greater inequities in care.
  • Reduced access to treatments.
• Our Solution: 340B needs a patient-first approach with reforms that ensure transparency and accountability.
• How You Can Help: You can demand change from state and federal lawmakers as well as ask key questions of your insurance and medical providers.

Understanding the 340B Program

The 340B program was supposed to help vulnerable, low-income, and rural patients access discounted medications. Today, many hospitals don’t pass those savings on to patients.

•       Did You Know? 340B hospitals can charge patients full price and keep the money for themselves.

What is the 340B Drug Pricing Program?

The 340B Drug Pricing Program, established in 1992, requires pharmaceutical manufacturers to provide prescription drugs to eligible healthcare  providers at significantly discounted prices. These providers are known as "covered entities," and include community health centers, hospitals, and other health care facilities. The program's original intent was to enable these entities to "stretch scarce federal resources as far as possible, reaching more eligible patients" by using the savings to provide more comprehensive services and patient care.

The Original Intent: A Safety-Net for Vulnerable Patients

Congress created the 340B program with a clear promise: help vulnerable patients access affordable medications when they need them most. The program was supposed to stretch federal resources so safety-net hospitals and clinics could serve more patients in rural areas and low-income communities. However, today, instead of helping patients, hospitals pocket the savings and charge patients full price.

Eligibility: Who Can Participate?

Covered entities are providers that are eligible to participate in the program. These healthcare entities include federal grantees such as federally qualified health centers (FQHCs) and hospitals.

340B Covered Entities

Federally qualified health centers

•       Health center program award recipients
•       Health center program look-alikes
•       Native Hawaiian health centers
•       Tribal and urban Indian health centers
•       Ryan White HIV/AIDS Program Grantees

Hospitals

•       Children's hospitals
•       Critical access hospitals
•       Disproportionate share hospitals
•       Free standing cancer hospitals
•       Rural referral centers
•       Sole community hospitals

Specialized clinics

•       Black lung clinics
•       Comprehensive hemophilia diagnostic treatment centers
•       Title X family planning clinics
•       Sexually transmitted disease clinics
•       Tuberculosis clinics

340B Patients

Most patients don’t know if they are classified as 340B patients, or whether they are being sold 340B medications. Although the original intent of the program was to help low-income, vulnerable and rural patients, many patients with private insurance are receiving drugs via the 340B program – after hospitals increase the price.  

Challenges with Patient Definition and Oversight

The 340B program lacks proper transparency to track usage and utilization. A major issue is the lack of a clear and meaningful definition of an "eligible patient" from Congress. This ambiguity allows covered entities to adopt expansive definitions, complicating oversight and enforcement against the diversion of drugs to ineligible patients. HRSA attempted to clarify this definition in 2015 but withdrew the guidance in 2017.

How the 340B Program Works

Here's how the 340B con job works: Hospitals buy medications at steep discounts—sometimes 50% off—then turn around and charge patients and insurers full price. It's a classic 'buy low, sell high' scheme, except it's funded by taxpayers and supposed to help patients.

The profits are massive. One 340B hospital paid $3,400 for an essential cancer drug under the program—then sold it for more than $25,000. Patients have to ask ourselves: Why are hospitals earning more than $20,000 in profits from a single prescription under a federal program intended for low-income patients?

The scheme got supercharged in 2010 when federal bureaucrats allowed hospitals to partner with unlimited numbers of contract pharmacies – think Walgreens, CVS, and Walmart. Now these retail giants and pharmacy benefit managers are cashing in too, pocketing billions meant for patient care.

The original promise was simple: use these savings to help more vulnerable patients. Instead, hospitals are using 340B profits for executive bonuses, new buildings, and expanding into wealthy neighborhoods where they can generate even more revenue. Meanwhile, the patients who were supposed to benefit still can't afford their medications and many don't even know the 340B program exists.

It's corporate welfare masquerading as charity care, and patients are paying the price.

Major Problems with 340B Program: From Safety-Net to Corporate Profits

Shift from Patient Support to Corporate Profits

Despite its original intent, critics argue the 340B program has veered off course, prioritizing profits over patient benefit. Consequently, the 340B Program has transformed from a charity care initiative to one of the healthcare industry's most profit centers.

Lack of Oversight and Transparency

As hospitals rake in billions from 340B, Washington has looked the other way. There are zero rules about how hospitals must spend these taxpayer-funded discounts. Want to use 340B profits for the CEO’s next bonus? Go ahead. Just ask Rochester General.  Want to buy an ad for the next Super Bowl? No problem. NYU Langone did.

Most hospitals won't even tell the public how they're spending 340B money. They just pocket the cash and keep quiet about where it goes.

The federal agency that's supposed to police this mess has basically given up. The Health Resources and Services Administration audits less than one half of one percent of 340B hospitals each year. In comparison, Medicare has an audit rate of 29 percent.

Explosive Growth in the 340B Program

Financial Expansion: $4 Billion to $66 Billion

The 340B program is the second-largest federal prescription drug program, behind only Medicare Part D. The total value of discounted drug purchases under the 340B program reached more than $66 billion in 2023, surpassing Medicare Part B and Medicaid in size.

According to the leading expert on drug distribution systems, Drug Channels, “The gross-to-net difference between list prices and discounted 340B purchases also grew, to $57.8 billion (+$5.5 billion). 340B purchases are now almost 40% larger than Medicaid’s prescription drug purchases.”

According to the University of Southern California Leonard D. Schaeffer Institute for Public Policy and Government Service, the 340B program had an estimated discounted purchases of about $4 billion per year in 2007. The program has increased at an astounding rate, compound average growth at 27 percent from 2014 through 2020, and it is projected to surpass Medicare Part D by 2027.

Increase in Covered Entities: 50 Hospitals to More Than 60,000 Covered Entities

Only about 50 hospitals participated in the 340B program shortly after 1992. This number grew to more than 2,600 hospitals by 2023. As of February 2025, more than 60,000 covered entities participate, a more than 600% increase since 2000.

Rise of Contract Pharmacies 2,000 to 200,000 Arrangements

In March 2010, HRSA permitted covered entities to contract with an unlimited number of third-party pharmacies. This single administrative change opened the door for profit generation. The number of contract pharmacy arrangements surged by 4,228% between April 2010 and April 2020, rising from 2,321 to 100,451. By 2024, there were over 200,000 arrangements.

Key 340B Issues: How Patients Are Left Behind

Hospital Markups: “Buy Low, Sell High”

Many hospitals do not pass the savings from discounted drugs on to patients. Instead, they keep the money while charging patients the full commercial price. A New Mexico hospital example illustrates the abuse: buying cancer drugs for $3,400 through 340B, then billing over $25,000 to insurance. This practice generates substantial profits for hospitals and PBMs.

No Patient Protections or Guaranteed Discounts

There are currently no patient protections and no requirements for how hospitals must use 340B discounts to help patients afford their medicines. As a result, the patients the program was designed to help often do not receive the charity care they qualify for. A 2018 GAO report found that 60% of covered entities failed to pass on the full 340B discount to patients.

Higher Out-of-Pocket Health Care Costs

In addition to paying full price for discounted medications, patients, employers, and taxpayers face higher health insurance premiums due to 340B abuses. An analysis by IQVIA found insured patients nationwide pay hundreds of dollars more due to 340B markups.

Bad for Rural Communities: Provider Consolidation

The 340B program has fueled hospital consolidation and the closure of community-based physician practices. Nearly 400 oncology clinics have closed since 2008, resulting in less patient choice, less convenience, and higher costs for patients. This shift has inadvertently squeezed out smaller, independent clinics that were the original intended beneficiaries.

Higher Insurance Premiums

The abuses of the 340B program contribute to higher healthcare costs for employers, working families, and taxpayers. An analysis found that Illinois alone faced an additional $533 million in higher health insurance costs annually. The National Alliance of Healthcare Purchaser Coalitions put the annual cost to employers from 340B program abuses at  $36 billion.

Forced to Use Out of State Pharmacies  

The program's growth in contract pharmacies is heavily influenced by large, for-profit retail chains and PBMs. These pharmacies are often located in affluent communities rather than the rural or medically underserved areas the program was intended to help. This forces patients to use out-of-state pharmacies, limiting their local options.

No Guarantee Money Used for Charity Care

The 340B program hands hospitals billions in taxpayer-funded discounts with zero strings attached. Hospitals can spend these profits however they want. Surprise, surprise – they're not spending them on patients.

The numbers are damning. For every $10 the most profitable 340B hospitals rake in, they spend just $1 on charity care for patients who can't pay. That's a 90% profit margin on money that was supposed to help the poor.

63% of hospitals that receive 340B discounts have charity care rates below the national average. Read that again: hospitals getting billions to help poor patients are actually doing less for poor patients than hospitals that get nothing.

More than one-third of 340B hospitals spend less than 1% of their budgets on charity care—and that number is growing every year. Meanwhile, just a handful of hospitals (25%) are doing 80% of all the charity work, while the rest pocket the profits and call it a day.

Here's the ultimate slap in the face: regular hospitals that don't participate in 340B actually provide more charity care on average than the hospitals getting special taxpayer-funded discounts to help the poor.

Congress created this program to help vulnerable patients. Instead, it's become the healthcare industry's biggest cash cow. It's time to cut off the money spigot for hospitals that won't help patients and focus on the few that actually do.

The Evidence: Uncovering Systemic Abuses

The Lack of Transparency and Oversight

• HRSA's Limited Audit Capacity

HRSA has been criticized for limited regulatory authority and insufficient data, making enforcement challenging. The agency relies primarily on hospital self-attestation to verify eligibility and contracts, without independently assessing the reliability of this data. HRSA audits a fraction of a percent of covered entities annually, compared to Medicare’s 29% audit rate. According to the U.S. Government Accountability Office, “HRSA has limited its audits to 200 covered entities per year since FY 2015, shrinking its already small oversight from less than 1.0 percent of covered entities to 0.33 percent in 2024.”

• Consequences of Few Audits

HRSA's pharmacy office only reviews about 200 organizations each year, out of more than 60,000 in the program. That's just a tiny portion, making it hard to spot and stop problems. This weak accountability creates big issues. Consequently, hospitals and pharmacies can obtain duplicate discounts, among other violations.  

• Findings from Government Reports

A 2018 GAO report found weaknesses in HRSA's oversight that impede its ability to ensure compliance at contract pharmacies. A 2025 Senate HELP Committee investigation uncovered that two major hospital systems generated over $1 billion in 340B revenue without passing on savings to patients

• Case Study: Richmond Community Hospital

Richmond Community Hospital generated $276.5 million in 340B revenue from 2018-2023 without benefiting patients.

• Case Study: Cleveland Clinic

The Cleveland Clinic pulled in nearly $933.7 million over just three years from the 340B program, with no direct benefits for patients.

Misdirection of Benefits

• The Squeeze on Rural and Small Community Clinics

The program’s growth has largely benefited major hospital systems and for-profit entities, which has inadvertently squeezed out the small, independent clinics that were the original intended beneficiaries.

• Growth in Affluent Communities, Not Underserved Areas

Studies suggest that the expansion of 340B entities and contract pharmacies is concentrated in  less diverse, higher income neighborhoods. One study found the growth of 340B pharmacies was concentrated in affluent communities.

“Margins on 340B drugs were higher among facilities in stronger bargaining positions and those serving wealthier areas,” concludes researchers Robert J. Nordyke, PhD, an expert in health economics; Jason Motyka, PharmD, an expert in drug pricing; and Dr. Julie A. Patterson, PharmD, PhD, who previously served as an Assistant Professor in Pharmacoeconomics and Health Outcomes at the Virginia Commonwealth University School of Pharmacy.

• The Rise of Provider Consolidation and Clinic Closures

The 340B program has fueled hospital consolidation and the closure of community-based physician practices. The Community Oncology Alliance tracks the ongoing closure of oncology clinics. The 2020 Community Oncology Practice Impact Report found that, over a 12-year period, “1,748 community oncology clinics and/or practices have closed, have closed since 2008, resulting in less choice and higher costs for patients and insurers.”

Profit Centers for Pharmacy Benefit Managers:

• Out-of-State Pharmacies

For-profit retail chains and PBMs now dominate the contract pharmacy landscape. The number of contract pharmacy arrangements has grown to over 200,000, with over half of all pharmacy locations in the U.S. acting as contract pharmacies.

• Dispensing Fees

CVS Health charges patients with insurance "dispensing fees" up to $85 per prescription, while the same patients without insurance pay only $15.

• Third Party Administrative Services Fee

Third-party administrative services fees are a significant revenue source for contract pharmacies. Both CVS and Walgreens add third-party administrative services fees, generating hundreds of millions of dollars per year. PBMs pocket more than 50 cents of every $1 in 340B profits.

What’s Working with the 340B Program

Success Stories: FQHCs

The original intent of the 340B program was to support small community and rural clinics. Some federal grantees, such as FQHCs, successfully leverage 340B revenue to provide significant discounts to patients and fund essential community programs, including transportation and translation services.

Success Stories: Small Community Clinics

Small community and rural clinics continue to serve a critical safety-net function for their communities. However, the dramatic growth of the program has largely benefited major hospital systems and for-profit entities, which has inadvertently squeezed out these smaller clinics.

Our Policy Position: 340B Reform: Transparency & Accountability

340B Transparency: Show Me The Money!

• Mandate Public Reporting of 340B Profits

Patients Rising supports legislation to require hospitals to publicly report 340B profits and detail how funds support patients or underserved communities.

• Strengthen Audits and Oversight

Congress must dramatically expand HRSA's audit capacity from the current 0.33% to establish meaningful oversight and require independent audits of 340B facilities and contract pharmacies.

• Charity Care Definition

Patients Rising supports requiring 340B institutions to provide annual financial reports showing the percentage of savings used to provide care to vulnerable patients, with penalties for non-compliance. A clear definition of charity care is needed to ensure nonprofit hospitals truly serve their communities

• Define "Eligible Patient" and Other Key Terms

Congress must codify a clear and meaningful definition of an "eligible patient" to ensure program integrity and prevent the diversion of drugs.

Real 340B Accountability: Ensure Patients Benefit

• Mandate that Savings Go to Patients

Patients Rising advocates for legislation that mandates savings fund clinics in low-income areas, patient transportation, or direct rebates.

• Require Charity Care Standards

Patients Rising supports requiring 340B institutions to provide annual financial reports showing the percentage of savings used to provide care to vulnerable patients, with penalties for non-compliance.

Timeline: How a Safety-Net Program Was Hijacked by Big HealthCare

1992: Program Creation

The 340B Drug Pricing Program was initially established in 1992 to enable eligible healthcare providers to offer affordable prescription medications to low-income, uninsured, and other vulnerable patients.

1996–2009: Initial Guidance and Limited Expansion

HRSA's initial guidance in 1996 permitted covered entities to use a single contract pharmacy if they lacked an in-house one. The program remained relatively small during this period.

2010: Policy Change: Unlimited Contract Pharmacies

In March 2010, HRSA issued new guidance allowing all covered entities to use an unlimited number of contract pharmacies. This administrative change enabled the commercial scale of pharmacy networks and was a critical point that allowed for-profit entities to capitalize on the discounts.

2010–2017: Unchecked Growth and Rising Profits

The number of contract pharmacy arrangements exploded by 4,228% between 2010 and 2020 alone. By 2017, nearly 20,000 unique locations acted as 340B contract pharmacies. A 2018 GAO report found that 60% of covered entities failed to pass on the full 340B discount to patients.

2018–2023: Skyrocketing Profits and Patient Impact

The program’s dollar volumes exploded during this period. Discounted purchases reached $38 billion in 2020 and hit a staggering $66.3 billion by 2023. Research reveals that hospitals and PBMs diverted this money, leading to massive profits for them and higher costs for patients.

2024–2025: Ongoing Concerns and Calls for Reform

As of February 2025, over 60,000 covered entities and over 200,000 contract pharmacy arrangements are in place. Despite this, patients are left demanding accountability and transparency as the program’s failed promise persists. Patients Rising and other organizations continue to press for real reforms rather than further expansion.

Take Action: Make Your Voice Heard

Questions Every Patient Needs to Ask

❓Am I a 340B patient — and why hasn't anyone told me?

❓ Is my care being used to generate hospital profits instead of helping patients like me?

❓ Am I receiving any of the savings from the 340B program?

❓ If not, who is keeping the extra money — and where is it going?