The healthcare affordability crisis is real. Families feel it at the pharmacy counter or when an unexpected diagnosis turns into an unexpected bill from their high-deductible health plan. Employers feel it in premiums that keep climbing year after year. A recent Gallup survey found that one-third of American adults are skipping meals or driving less to help pay for care they need, but rather than align around solutions, Washington continues to look for a villain.
The recent scapegoat is hospitals with a particular focus on the 340B drug pricing program. Critics argue that 340B costs consumers, health plans and the government more money: it does not, and weakening it won’t lower prices at the pharmacy counter. Instead, the 340B program has become a proxy fight in the broader affordability debate.
The truth is that we won’t lower costs by hunting for a villain. We’ll lower healthcare costs by demanding price transparency across the supply chain and by incentivizing prevention and outcomes, which requires systemwide accountability — not searching for someone to blame.
Transparency Over Villainizing
The 340B program was created to support hospitals that qualify for Disproportionate Share Hospital (DSH) status, meaning they care for a higher percentage of low-income patients than the average hospital. Over the ensuing years, the program was expanded by Congress to include critical access hospitals, rural referral centers and children’s hospitals.
While raised as a significant concern by lobbyists for the drug industry, the growth of the program should be celebrated rather than condemned. Since the creation of 340B over 30 years ago, remarkable clinical innovations and a shift from more expensive inpatient settings to less costly outpatient settings have contributed to significant program growth. One major area of advancement that has contributed to the growth of the program is in cancer care. From biologics and immunotherapies to complex oncology infusions, 41% of all 340B purchases are for oncology drugs, making this vital, often life-saving care for all communities.
The 340B program is designed to make the most out of federal dollars, but it has not contributed to rising costs. Nevertheless, the program’s growth has come under fire from lobbyists for the drug industry. Despite a requirement of consistent compliance audits, there’s a new push by some pharmaceutical companies to require hospitals to submit exhaustive claims-level data before providing 340B discounts, severely impacting the fragile cash flow of many hospitals and essentially giving an interest-free loan to multi-billion-dollar drug companies. Moreover, this would add a new and costly administrative layer and virtually eliminate any savings achieved from the discount.
This new proposal would not lower costs for you and me: the 340B program is a discount, not a surcharge, and framing these new restrictions as an affordability strategy is misleading. But this debate does reinforce the need for greater price transparency, in part because the numbers tell a different story.
In 2024, the 340B program received $46.5 billion in discounts, which might indeed sound like a lot until you learn that it represents just 3.1% of global pharmaceutical revenues and 7% of U.S. pharmaceutical revenues.
Most hospitals in the U.S. operate on 1.3-4.9% margins while the pharmaceutical industry operates with 25-35% annual profit margins. Part of the value proposition for 340B has always been to use some of the pharmaceutical industry’s massive margins to support vulnerable patients and critical access and rural hospitals, and to create healthier communities.
So, we must ask why this attempt to villainize a program that’s working? As we watch another blame game take shape, it demands greater transparency from both sides about the real impact of any proposed change, and whether it will in fact lead to lower prices. If we want more efficient, effective healthcare, the pharmaceutical industry should be required to disclose manufacturing cost or profit margin of drugs sold, not demand hospitals jump through new hoops when these programs grow.
Incentivizing Prevention
The healthcare system’s historic fee-for-service model has led to rampant inefficiencies that treat the problem rather than preventing it, which is what has contributed to the state of our system. While important, price transparency alone isn’t enough to combat the problem: we must fundamentally change the incentives.
To incentivize a commitment to prevention and better outcomes at scale, policymakers must prioritize:
- Accelerating downside-risk value-based models
- Removing archaic legislative barriers to integrated, more cost-effective care
- Stronger incentives for primary care and chronic disease management to reduce avoidable and costlier conditions later
- Requiring data sharing and care coordination that helps eliminate duplicative, fragmented care to patients
With this cost crisis at our door, it’s in the interest of hospitals, health insurers and pharmaceutical companies to ask hard questions like: what incentives are pushing more care, more prescriptions and more treatment rather than better patient outcomes? Where are prices rising the fastest and why? And how do we restructure incentives, so coordination becomes the default instead of an exception?
The 340B program may be the headline now, but harming it isn’t a strategy to address affordability. If lowering healthcare costs is a priority in Washington, we must accelerate greater transparency and payment models that reward prevention and outcomes. As Americans are forced to make impossible decisions to afford care, they cannot afford any more blame games.
