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August 25, 2026

Two paths toward 340B reform: Will Congress put patients first?

For years, the 340B Drug Pricing Program has operated with too little transparency and too little accountability for how its benefits reach patients. Although the program was created to help vulnerable and underserved patients access needed care and medicines, policymakers often lack visibility into whether discounts are directly improving affordability or access for the patients the program was intended to serve. That has helped turn a targeted safety-net program into a significant source of revenue for many large hospital systems, while raising important questions about whether program resources are consistently reaching the patients Congress intended to benefit.

Congress now has two serious Senate frameworks before it: Senate HELP Committee Chairman Bill Cassidy’s 340B Drug Pricing Integrity and Affordability for Patients Act discussion draft and the bipartisan SUSTAIN 340B Act discussion draft developed by a group of six senators.

Both deserve credit for taking on a program that has been allowed to grow without clear, enforceable rules. Both include meaningful transparency and integrity measures. The fact that lawmakers in both parties are dedicating significant attention to 340B reform is an encouraging development. After years of questions about transparency, oversight, and patient benefit, Congress is taking a closer look at how to strengthen the program and ensure it works as intended. Both proposals reflect a growing recognition that the success of 340B should ultimately be measured by how well it serves patients.

If you are a patient advocate, a state legislator responsible for a Medicaid budget, an employer, or a taxpayer, there is much to like in Chairman Cassidy’s approach. It asks whether 340B savings are lowering costs and improving access for the patients the program was created to serve.

If you are a hospital system seeking to preserve broad access to 340B revenue and the existing contract-pharmacy model, the SUSTAIN framework is more accommodating.

That is the key policy question before Congress: how can lawmakers ensure that 340B discounts produce measurable benefits for patients while preserving access to care through legitimate safety-net providers?

Cassidy’s approach: patient benefit and transaction-level accountability

Chairman Cassidy’s discussion draft does not assume that a discount delivered to a hospital automatically becomes a patient benefit. It requires documentation, expands transparency, defines key terms, and puts real limits around how the program can be used.

Most importantly, it creates a practical path for 340B discounts to be delivered through either an up-front discount or a retrospective rebate. Under the rebate option, a covered entity submits standardized claims documentation and the manufacturer pays an undisputed rebate promptly. That produces a record of the transaction, helps prevent duplicate discounts, and gives states and regulators better visibility into whether the program is working as intended.

The value of this approach is not simply administrative. Greater transparency can help policymakers, regulators, and stakeholders better understand where 340B resources are flowing and whether those resources are reaching the patients Congress intended to benefit.

The draft also keeps contract pharmacies available, but does not treat every arrangement as automatically justified. It requires registration and compliance procedures, limits certain hospital covered entities to five contract pharmacies, and generally ties eligible pharmacies to the covered entity’s service area. By pairing continued access with greater transparency and oversight, the proposal seeks to ensure that program growth remains connected to patient care and program integrity.

The principle is straightforward: 340B should preserve access for legitimate safety-net providers while requiring proof that discounts are reaching eligible patients and supporting affordable care.

The SUSTAIN approach: protect the existing hospital and contract-pharmacy model

The SUSTAIN discussion draft also advances important reforms. It would establish a statutory patient definition, require reporting on covered entities’ use of 340B savings, strengthen audits and oversight, and address duplicate-discount controls. Those are welcome steps.

Those provisions represent meaningful areas of common ground and demonstrate growing bipartisan agreement that stronger transparency, clearer rules, and improved program oversight are necessary.

At the same time, the framework places greater emphasis on protecting the existing contract-pharmacy structure and relies more heavily on a government-contracted clearinghouse model to facilitate program administration.

Supporters view those provisions as tools to maintain access and improve administration. The question for policymakers is whether they also create sufficient transparency and accountability to demonstrate that savings are improving affordability and access for patients.

Cassidy’s approach is clearer: document the claim, verify eligibility, and provide a standardized, time-bound discount or rebate. Congress should use data systems to stop abuse, not create a process that delays the benefit Congress intended patients and true safety-net providers to receive.

That distinction matters. Transparency is most valuable when it helps answer a simple question: are patients benefiting from the program? Any reform that expands reporting and oversight while strengthening accountability to patients would represent an important step forward.

There is common ground worth keeping.

This should not be an all-or-nothing debate. Both frameworks recognize that 340B needs clearer rules, stronger reporting, more reliable patient definitions, better safeguards against duplicate discounts, and meaningful oversight.

Congress should keep the best parts of both approaches. It should demand transparent reporting on where 340B savings go, protect legitimate safety-net access, strengthen program integrity, and ensure that states can identify and protect the Medicaid rebates to which they are entitled.

But Congress should not stop at reporting. Transparency is a tool, not the finish line.

The ultimate goal is helping patients access needed medicines and care. Patients need lower out-of-pocket costs, policymakers need confidence that the program is operating as intended, and taxpayers deserve assurance that 340B resources are being used effectively.

The strongest final legislation will be the one that measures success by patient benefit—not by the amount of revenue a hospital can retain.

The best solution should combine transparency, accountability, and patient focus. Congress has an important opportunity to modernize the program, reinforce public trust, and ensure that 340B delivers meaningful value to the patients it was created to serve.

Finally: A Common-Sense Approach to Reducing Health Care Costs.

How HRSA's new 340B rebate model can reduce fraud - and costs.

After years of congressional investigations, federal watchdog reports, and growing public scrutiny of the 340B Drug Pricing Program, there is finally an opportunity to bring common sense and accountability to a system that has grown far beyond its original purpose.

Congress created 340B in 1992 to help safety-net providers stretch limited resources and serve vulnerable patients. But over time, the program has expanded into a massive and opaque source of revenue for many large hospital systems. The result is a program that too often rewards hospital consolidation, higher-cost care, and financial gamesmanship—while patients, employers, taxpayers, and cash-strapped state Medicaid programs pay the price.

The evidence is no longer anecdotal.

The Congressional Budget Office recently examined the dramatic growth of 340B and concluded that the program encourages behaviors that tend to increase federal spending, including the use of more and higher-priced drugs, expansion of services, and the integration of hospitals with off-site clinics. CBO found that the integration of hospitals and clinics was likely the largest of several factors driving the program’s growth.

That matters because hospital consolidation has real consequences for patients. When large hospital systems acquire independent physician practices, specialty clinics, and outpatient infusion centers, care often shifts from lower-cost community settings to hospital-owned settings. The same care can cost substantially more simply because it is delivered by a hospital-owned provider.

Patients see the result in higher premiums, larger deductibles, and higher out-of-pocket costs. Employers see it in rising health benefit costs. Taxpayers see it in higher federal and state health spending.

The incentives built into 340B help drive that problem. Hospitals can purchase drugs at steeply discounted 340B prices, then receive reimbursement from commercial insurers and government programs at rates that do not necessarily reflect the discounted acquisition cost. The larger the spread, the greater the financial incentive to acquire more practices, move more care into hospital-owned settings, and use more expensive drugs.That is not what Congress intended when it created a targeted safety-net program.

There is also a direct cost to state Medicaid programs.

Federal law prohibits “duplicate discounts”—meaning drug manufacturers should not be required to provide both a 340B discount and a Medicaid rebate on the same drug. But the Government Accountability Office and the HHS Office of Inspector General have repeatedly documented weaknesses in the way 340B claims are identified, particularly in Medicaid managed care.

When states cannot accurately identify which prescriptions were filled with 340B drugs, they risk missing Medicaid rebates to which they are legally entitled. Those forgone rebates mean states pay more for prescription drugs at a time when Medicaid budgets are already under pressure.

This is not a technical paperwork problem. It is a patient and taxpayer problem.

A program intended to support vulnerable patients should not create incentives that increase costs, fuel consolidation, and make it harder for states to collect the rebates that help finance care for low-income families.

That is why HRSA’s proposed revised 340B rebate-model pilot deserves serious support.

The concept is simple. Rather than receiving an up-front 340B discount without a clear, transaction-level record of where the drug ultimately goes, covered entities would submit the necessary data after a drug is purchased and dispensed. The manufacturer would then provide the 340B discount through a rebate.

The price is still discounted. The statutory benefit remains available. But the transaction creates an auditable record.

That record can help confirm that 340B discounts are being used for eligible patients, reduce the risk of duplicate discounts, and give regulators and state Medicaid programs better visibility into how the program is operating. It is a common-sense approach to improving program integrity without changing 340B’s underlying mission.

A rapid rebate model protects legitimate safety-net providers while bringing needed discipline to 340B. Covered entities that submit complete, verifiable claims should receive rebates quickly, under clear and enforceable timelines. The statutory discount remains intact, and providers receive the value they are entitled to without unnecessary cash-flow disruption.

The current system’s lack of timely, transaction-level verification creates opportunities for abuse, claims harvesting, duplicate discounts, and profit capture by hospitals and middlemen. A prompt rebate process closes those gaps. It ensures that the 340B discount follows an eligible patient and documented care, rather than rewarding opaque arrangements that have too often put institutional revenue ahead of patient benefit.

No other major health care program should operate on the assumption that billions of dollars can move through the system without clear documentation, effective oversight, or a reliable way to determine whether public resources are reaching the patients they were meant to help.

HRSA’s proposal is not the end of the fight to reform 340B. Congress still has work to do. States still need better tools to protect Medicaid rebates. And policymakers must continue asking whether 340B savings are actually benefiting uninsured and low-income patients—or simply becoming unaccountable hospital revenue.

But the revised rebate-model pilot is an important first step.

After years of evidence showing the consequences of unchecked hospital abuse of 340B, there is finally a common-sense path toward greater transparency, accountability, and lower health care costs.

How the 340B Program Is Driving Hospital Consolidation, Increasing Health Care Costs, and Reducing Patient Access

After years of congressional investigations, watchdog reports, and growing media attention focused on the 340B Drug Pricing Program, a buzz of activity has begun on Capitol Hill. In recent weeks, lawmakers in both the House and Senate have introduced proposals to reform the controversial program, including Senate HELP Committee Chairman Bill Cassidy's comprehensive discussion draft.

As Congress begins weighing competing approaches to reform, policymakers have an expanding body of evidence documenting how the 340B program has evolved over the past three decades. Among the most significant is an April report from the Paragon Health Institute examining how the financial incentives embedded in the program have contributed to hospital consolidation, higher health care costs, and reduced access to independent community-based care.

In his paper, The Hospital Cost Crisis: How Government Policies Drive Consolidation, Undermine Competition, and Fuel Soaring Prices, health policy scholar John R. Graham examines the government policies that have fueled the rapid consolidation of America's hospital industry. The report identifies the 340B Drug Pricing Program as one of the policies that has unintentionally encouraged hospitals to acquire physician practices, specialty clinics, infusion centers, and other outpatient providers by creating powerful financial incentives tied to discounted prescription drugs.

According to the report, every acquisition expands a hospital system's ability to purchase drugs through the 340B program while continuing to receive reimbursement based on substantially higher commercial rates. Those incentives reward growth through acquisition rather than improving value or expanding patient access. Over time, they have helped reshape the health care marketplace, leaving fewer independent physician practices and concentrating more care within large hospital systems.

The consequences extend well beyond ownership changes.

As independent physician practices disappear, patients increasingly lose access to lower-cost community providers. Care shifts into hospital-owned outpatient departments where the same services often cost significantly more than they do in physician offices. Rural communities can be especially vulnerable as independent practices struggle to compete with large regional systems, leaving patients with fewer local options and longer travel distances for care.

The report also documents the extraordinary growth of the 340B program. What Congress created in 1992 as a targeted safety-net program has expanded into one of the nation's largest federal drug discount programs. Yet despite that growth, there is still no comprehensive public accounting of how much revenue participating hospitals generate through 340B or how those dollars directly benefit the low-income and uninsured patients the program was designed to serve.

Paragon concludes that these incentives affect the entire health care system. Hospital consolidation increases commercial health care prices, raises employer health benefit costs, increases Medicare and Medicaid spending, and contributes to higher insurance premiums and out-of-pocket expenses for American families. The report argues that these costs are not incidental—they are a predictable consequence of policies that reward consolidation and higher-cost sites of care.

For taxpayers, the implications are significant.

Federal and state governments subsidize the 340B program while also paying many of the downstream costs created by hospital consolidation and higher reimbursement rates. Employers face rising health care costs. Families pay more for coverage. State Medicaid programs absorb higher expenditures. Medicare spending increases as care migrates into more expensive hospital-owned settings. In short, taxpayers and patients increasingly bear the financial consequences of a program that operates with limited transparency and accountability.

The debate now underway in Congress is about more than drug discounts. It is about whether federal policy should continue creating incentives that increase health care costs, accelerate hospital consolidation, and reduce access to affordable community-based care.

The Paragon Health Institute's report adds an important voice to that debate. As lawmakers consider competing proposals to modernize the 340B program, its findings provide valuable context for understanding why reform has become a bipartisan issue and why greater transparency, accountability, and patient-centered policies are essential to restoring the program's original mission.

The Hidden Cost of 340B: How States Are Losing Billions Meant for Medicaid

Why_340B_Drug_Discounts_Cost_Taxpayers_BillionsArtist Name

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A new analysis from Third Way, authored by Gaby Hartney and David Kendall, shines a spotlight on an often-overlooked consequence of the federal 340B Drug Pricing Program: billions of dollars in lost Medicaid savings that could otherwise help states preserve health care services. We encourage readers to review the original memo, "How to Reduce Medicaid Cuts Using the 340B Drug Pricing Program," for a detailed explanation of the issue.

For years, the debate over 340B has focused primarily on hospitals and pharmaceutical manufacturers. But another stakeholder is quietly paying the price: state Medicaid programs—and ultimately taxpayers.

According to Third Way's analysis, the interaction between the 340B Drug Pricing Program and Medicaid Managed Care has created a financial loophole that allows hospitals to retain the benefit of deeply discounted drug purchases while preventing state Medicaid programs from receiving the manufacturer rebates they would otherwise be entitled to under federal law. Because Medicaid cannot receive both a 340B discount and a Medicaid rebate on the same prescription, hospitals' use of 340B drugs for many Medicaid managed care patients effectively shifts billions of dollars away from state Medicaid programs.

Third Way estimates these lost rebates cost Medicaid between $2 billion and $6 billion every year. Those are resources that could otherwise help states maintain eligibility, preserve benefits, strengthen provider networks, or reduce pressure on already strained state budgets.

Why This Matters

The original purpose of the 340B program was straightforward: help true safety-net providers stretch scarce resources to serve vulnerable patients.

Over time, however, the program has expanded dramatically. Today it has become one of the largest federal drug pricing programs in the country, while oversight and transparency have struggled to keep pace. As participation has grown, so too has the financial impact on Medicaid programs that lose access to statutory drug rebates when certain prescriptions flow through the 340B system instead.

For states already facing difficult Medicaid budget decisions, those lost rebates are not theoretical—they represent real dollars that could fund patient care.

A Reform Opportunity

Rather than reducing services for Medicaid beneficiaries, Third Way argues policymakers should first examine whether existing Medicaid dollars are being used as efficiently as possible.

The memo outlines two potential reforms:

Require Medicaid-covered drugs to be purchased outside the 340B program so states can receive the rebates Congress intended.
Alternatively, modify reimbursement through a rebate-based approach that preserves appropriate 340B support while allowing Medicaid programs to recover at least part of the rebates currently being lost.

Importantly, the authors also note that Congress could tailor reforms to protect rural hospitals and other essential safety-net providers while addressing the largest sources of unnecessary Medicaid spending.

Transparency Benefits Everyone

Regardless of where policymakers stand on broader 340B reform, one principle should command broad bipartisan support: transparency.

State officials should know how much Medicaid is paying, how much hospitals are receiving through 340B, and whether those dollars are improving care for low-income patients. Taxpayers deserve confidence that public resources are being used to strengthen the safety net—not simply creating financial windfalls without meaningful accountability.

As states grapple with growing Medicaid costs, understanding the hidden interaction between Medicaid rebates and the 340B program is becoming increasingly important. Reforming these incentives could help preserve scarce Medicaid dollars while ensuring the 340B program remains focused on its original mission: supporting care for vulnerable patients.