Trump Cracks Down on Hospital Abuse of Charitable Drug Discount Program

The Trump administration is moving forward with a new approach to the 340B drug discount program that will require participating drug manufacturers to provide discounts through rebates only after claims are submitted and verified.

The Health Resources and Services Administration (HRSA) announced a revised 340B Rebate Model Pilot Program that will apply to certain drugs beginning in 2026. The announcement moves the rebate model from a proposed reform toward implementation as the administration seeks greater oversight of a program that has expanded rapidly in recent years.

CFE previously supported the administration's move toward a rebate model as one way to address abuse of 340B by large hospital systems. The revised pilot will provide an early test of whether greater claims verification can strengthen program integrity while preserving the discounts required under federal law.

340B Has Grown Into a $100 Billion Program

Congress created 340B to require drug manufacturers participating in Medicaid to provide discounted outpatient drugs to certain hospitals and other health care providers that serve vulnerable populations.

The program has grown substantially. According to HRSA, 340B drug purchases increased from $53.7 billion in 2022 to more than $100 billion in 2025.

Under the existing system, covered entities generally receive the 340B discount when purchasing eligible drugs. Under the revised pilot, participating manufacturers will instead provide the discount through a rebate after receiving and verifying claims information.

The rebate structure gives manufacturers access to transaction-level information before providing the discount, creating an additional safeguard against duplicate discounts and other improper claims.

The Rebate Model Adds Accountability

The growth of 340B has raised broader questions about whether the program's financial benefits are reaching the patients Congress intended to help.

Large tax exempt hospital systems can purchase eligible drugs at steep 340B discounts and receive reimbursement based on higher negotiated rates. The hospital can retain the difference, and federal law generally does not require those savings to be passed directly to the patient receiving the drug.

Concern about this arrangement extends well beyond free-market policy groups. Rev. Al Sharpton has called for stronger oversight of 340B, criticizing a system in which hospitals can purchase deeply discounted drugs, bill insurers and government health programs at higher rates, and retain the difference without having to show how the savings benefit vulnerable patients.

Sharpton argued that hospitals participating in the program should provide a detailed accounting of how their 340B savings benefit patients rather than their bottom lines. Coming from a prominent progressive civil rights leader, his criticism underscores how concerns about 340B hospital practices have crossed ideological and partisan lines.

CFE raised similar concerns when the administration initially moved toward a rebate model. Requiring claims to be verified before the discount is finalized can provide greater visibility into transactions and make it more difficult for the same drug to receive both a 340B discount and a Medicaid rebate.

HRSA's revised pilot maintains the statutory 340B discount while establishing requirements for claims verification and timely rebate payments.

More 340B Reform Is Still Needed

The rebate pilot will not resolve the broader problems surrounding 340B.

Congress has never established a clear requirement that hospitals pass 340B savings directly to patients. The program's rapid expansion has meanwhile increased the financial stakes surrounding how hospitals, pharmacies, and drug manufacturers use the discount.

Those questions have become more pressing as 340B has grown. Purchases under the program nearly doubled between 2022 and 2025, reaching more than $100 billion annually.

The revised rebate model provides the administration with an opportunity to test whether better claims data and verification can improve oversight of those transactions. Its implementation should provide useful information for policymakers considering broader changes to the program.

CFE Takeaway

The Trump administration is no longer simply considering a 340B rebate model. HRSA is moving forward with a revised pilot that will put the approach into practice.

Claims verification and transaction-level data can help prevent duplicate discounts and provide greater accountability in a program that has surpassed $100 billion in annual drug purchases. The pilot will not address every weakness in 340B, particularly the lack of a requirement that hospital savings reach patients, but it represents a meaningful step toward stronger oversight.

Concerns about those weaknesses now span the political spectrum. The administration should use the pilot to establish whether the rebate model can reduce abuse while Congress considers broader reforms to ensure 340B serves the vulnerable patients the program was created to help.