Trump’s Charitable Drug Reform Protects Patients and Taxpayers

The 340B drug discount program was supposed to help low-income patients get cheaper prescription drugs. Instead, it has become a taxpayer-subsidized profit center for large nonprofit hospital networks that buy drugs at steep discounts, bill insurers and government programs at higher rates, and keep the spread. The Washington Post editorial board’s new op-ed calls the program what it has too often become: corporate welfare for hospitals. The Center for a Free Economy and more than 40 conservative groups warned about this problem over a year ago. Washington should now act on the Trump Administration’s common sense solution: make hospitals prove that 340B discounts are actually helping poor patients.

340B Has Drifted Far From Its Mission

Congress created 340B to help safety-net providers serve low-income and vulnerable patients. The basic idea was simple. Hospitals and clinics serving poorer communities could buy prescription drugs at a discount, giving them more capacity to care for patients who needed help.

That mission has been badly distorted.

As the Washington Post editorial board explains in its op-ed, 340B now gives hospitals a powerful financial incentive to buy drugs at a discount and collect standard reimbursement from insurers and government health programs. The hospital keeps the difference. The Post notes that 340B purchases grew from about $6.6 billion in 2010 to roughly ten times that level by 2023, while large health systems came to dominate the program.

This is not how a safety-net program should work. A program created to help poor patients should not become a hidden revenue stream for large nonprofit hospitals that already receive generous tax benefits and public subsidies.

CFE Warned Congress About This Abuse

The Center for a Free Economy joined more than 40 conservative groups in warning congressional leaders that 340B has become one of the clearest examples of government-driven waste, fraud, and abuse in health care.

The coalition letter made the core problem plain: large nonprofit hospital systems can use 340B to obtain drugs at low or no cost, move those drugs through sprawling networks, and use the program to drive revenue in ways Congress never intended. The letter pointed to the Bon Secours scandal in Richmond as a leading example of how a program built around indigent care can be used to generate profits far away from the patients it was supposed to help.

The warning was not complicated. If large nonprofit hospitals receive major government benefits, they should face basic accountability. If they claim a drug discount intended for poor patients, they should be able to show that poor patients benefited.

Trump’s Pilot Is Common Sense Reform

The Trump Administration has taken a useful step by exploring a 340B rebate model pilot program through the Health Resources and Services Administration. The Federal Register request for information says HRSA is evaluating whether a rebate pilot could improve program integrity, reduce duplicate discounts, address improper claims, and increase pricing transparency.

That is the right direction.

Under the current model, hospitals can receive the discount up front. A rebate model would move toward a more accountable structure: show the drug qualified, show the patient qualified, show the discount served the program’s purpose, and then receive the rebate. That is not a radical idea. It is a prove-it reform.

Hospitals that are using 340B properly should have no reason to fear a system built around documentation, transparency, and accountability. Hospitals using 340B as a revenue machine should not be allowed to hide behind the language of charity care.

Taxpayer Groups Back Reform

CFE is not alone. Brian Blase and Paragon Health Institute submitted public comments on the 340B rebate model pilot program, with Blase joined by Jackson Hammond and Gabrielle Kalisz in supporting greater accountability around the program.

National Taxpayers Union has also backed the rebate model pilot, arguing that it can help restore 340B’s mission while improving cost control and giving HRSA better, more timely data on program integrity.

Citizens Against Government Waste has repeatedly called attention to 340B reform, maintaining a dedicated 340B resource page and publishing a series of pieces on program abuse, wasteful spending, and the need for reform in Congress.

The taxpayer case is clear. 340B is not free. When hospitals exploit drug discounts, costs show up elsewhere in the system through higher premiums, higher taxpayer costs, and more expensive federal health programs.

CBO Shows Reform Can Save Taxpayers Money

The Congressional Budget Office has already shown that 340B reform can reduce federal spending. One CBO budget option found that reducing Medicare payment rates for drugs delivered by 340B hospitals to a drug’s average sales price minus 22.5 percent would reduce outlays by $73.5 billion over ten years. A second option, reducing payment rates to average sales price, would reduce outlays by $15.4 billion over the same period.

Those savings are not abstract. They show how much money can be protected when Washington stops overpaying hospital systems that already received discounted drugs.

Congress does not need another study to know the program needs guardrails. The evidence is already on the table.

CFE Takeaway

340B reform should be an easy call. A program designed to help low-income patients should not enrich large hospital systems, drive up costs, and leave taxpayers holding the bag.

The Washington Post editorial board is right to call out the corporate welfare problem. CFE and more than 40 conservative groups were right to warn Congress that 340B has become a major source of waste, fraud, and abuse. The Trump Administration’s rebate pilot offers a practical way to restore accountability.

Hospitals should prove 340B discounts help poor patients. If they cannot prove it, taxpayers should not subsidize it.