A federal program meant to help hospitals that care for the poor is facing new questions about where its money goes.
Hospitals that benefit from the 340B program spend a smaller share of their budgets on charity care than other hospitals, according to a new study from the Pioneer Institute, a Boston policy group.
What is the 340B program?
Created more than 30 years ago, the program lets eligible providers buy prescription drugs at steep discounts. They are then paid full price by patients and insurers and keep the difference to support their operations.
It was designed to help rural hospitals, hospitals serving many Medicaid patients and other providers that act as a safety net. The Affordable Care Act later allowed many more hospitals to join, just as hospital systems were consolidating.
Patients and payers spent $244 billion on drugs bought through the 340B program last year, according to Berkeley Research Group, while those drugs cost providers about $100 billion. Sales grew 152% from 2020 to 2025, nearly three times the growth of all U.S. drug sales.
What did the charity care study find?
The study of 3,999 hospitals found that 340B hospitals spent 2.16% of operating budgets on charity care, compared with 2.82% at other hospitals, including those run for profit. They also spent 29% less on care for uninsured patients.
The authors say the study does not prove that joining the program causes hospitals to provide less charity care. Instead, they argue the discount does not reliably translate into more help for patients and that current rules give the public no way to see how the savings are used.
A senior fellow at the institute said a discount this large should not be a mystery and that hospitals could easily prove it reaches patients in need if it does.
How do hospitals defend the 340B program?
The American Hospital Association says charity care is only one way to measure what hospitals do for their communities. An association policy official called the research part of a long line of misleading studies and said hospitals use the savings to maintain and expand care.
The association estimated that 340B hospitals provided nearly $100 billion in community benefits in 2022. Its former chief executive has argued the program’s growth is driven by rising drug prices set by manufacturers.
A separate report funded by the drug industry’s main trade group found that 60% of the money spent on 340B drugs is kept as profit by hospitals, clinics and their partners.
Where does the money go?
No federal rule requires hospitals to report how much they earn from the 340B program or how they spend it. The Cleveland Clinic reported $933.7 million in 340B benefits from 2020 to 2023 and told Congress there is no requirement to pass savings directly to patients.
Large retail and insurance companies also profit. Five companies, CVS Health, Walgreens, Walmart, Cigna and UnitedHealth Group, account for 77% of contract pharmacy relationships in the 340B program, according to the Drug Channels Institute.
What changes are coming to the 340B program?
Starting Jan. 1, 2027, a federal pilot will require some providers to pay list price up front and later receive the discount as a rebate. Officials say it will improve visibility into transactions. Hospital groups in Maine sued Oct. 9 to block it, warning that the change could force struggling hospitals to cut care.
Medicare regulators have also proposed lowering what Medicare pays hospitals for 340B drugs, a change estimated to save $5.7 billion. A group of House Republicans urged them to reconsider, warning of a cut of nearly 40% in payments to hospitals that rely on the program.
With billions at stake, the fight over the 340B program is likely to intensify in Washington.
