Gaps in the law and lack of oversight have led to misuse and uncertainty in the program. For example, the New York Times found that Bon Secours Health System, in Virginia, used 340B funds to expand services in affluent neighborhoods at the expense of patients who really needed it.
So how did the program get here?
For starters, the program was intended to help low-income or vulnerable patients treated at safety-net hospitals, but federal law never defined who qualifies as an eligible 340B "patient."
Drug companies tried to create their own "patient" definition to provide discounts after healthcare providers proved the medicines were given to eligible patients. Courts blocked drug companies from doing this. However, the Trump Administration just announced it will pursue its own rebate model program, now set to take effect January 1, 2027. This radical switch from an upfront discount to a rebate on the back end could create serious cash flow problems for providers who rely on the program.
Though drug companies and the Trump Administration are trying to reform the program by themselves, federal law still doesn’t allow for a uniform way to prevent duplicate discounts or to prevent discounted medicines from going to ineligible patients. The law also doesn’t provide any way for the government to validate 340B pricing data across Medicaid, Medicare price negotiations, and other federal programs.
Meanwhile, the law makes no mention of 'contract pharmacies' — external pharmacies that partner with healthcare organizations eligible for the 340B program. Without clear rules, 'contract pharmacies' can sometimes give discounted drugs to people who aren't eligible for them, and drug companies end up paying for it anyway. This undermines the trust and legitimacy of this program as a whole.
Although the Health Resources and Services Administration (HRSA) permitted these arrangements for years, drug manufacturers began restricting shipments to contract pharmacies in 2020. This disrupted patient access to critical medications. States have responded with a patchwork of laws, but because 340B is a federal program, it requires a federal solution.
Finally, hospitals can extend 340B discounts to acquired outpatient "child sites." These are off-campus outpatient facilities, clinics, or infusion centers operated by a main hospital or "parent site." And while this practice might not seem problematic, some hospitals have abused it to collect massive discounts while they simultaneously cut services for underserved patients — another way 340B has strayed from its intent and mission.
