August 28, 2026
The Honorable Bill Cassidy
Submitted to 340bforpatients@help.senate.gov
Re: 340B Drug Pricing Integrity and Affordability for Patients Act Discussion Draft
On behalf of National Taxpayers Union, the nation’s oldest taxpayer advocacy organization, we write with brief comments on Chairman Bill Cassidy’s 340B Drug Pricing Integrity and Affordability for Patients Act Discussion Draft. NTU was founded in 1969 to achieve favorable policy outcomes for taxpayers with Congress and the executive branch. Our experts and advocates engage policymakers on important matters affecting taxpayers in a variety of settings, including health care policy.
Given the unsustainable growth of federal health spending, innovative approaches that can reduce utilization and overall costs are needed more than ever. Prescription drugs are one of the few scalable solutions that keep patients out of expensive clinical settings, such as hospitals. Therefore, taxpayers have a significant stake in how the federal government approaches prescription drug development, deployment, and payment. The rapid growth of the 340B Drug Pricing Program in recent years warrants special scrutiny to ensure this program remains focused on its intended mission of providing affordable drugs to needy patients while minimizing counterproductive incentives and distortions throughout the health care system.
Congress created 340B in 1992 to give hospitals that serve low-income and uninsured patients access to steep discounts on prescription drugs. To participate in Medicaid and Medicare, pharmaceutical manufacturers must sell their drugs to qualifying hospitals and other covered entities at heavily reduced prices—typically 25% to 50% below wholesale rates. However, insurers and government health programs continue to reimburse 340B entities for these treatments at non-discounted market rates. The lack of statutory guardrails governing how savings should be channeled toward patients means providers can pocket this spread as pure profit.
This lucrative incentive structure has fueled 340B’s explosive growth. From 2012 to 2024, annual drug purchases through 340B skyrocketed from $6.9 billion to $81 billion.1 That amounts to more than an eleven-fold increase—a growth rate that has even outpaced Medicare Part D over the same period.
At first glance, the burden 340B imposes on taxpayers is not obvious. After all, the discounts supposedly come out of the pockets of pharmaceutical companies. Nevertheless, this program’s distortions impact taxpayers directly. The “buy low, sell high” reimbursement structure encourages providers to prescribe more costly brand-name medicines since these products generate larger margins than generics. In 2023, nearly 90% of all drugs purchased through 340B were branded medicines, whereas outside the program they represented around 78% of sales.2 Employer-sponsored insurance plans, federal health programs, and state-employee health care plans ultimately bear these added costs.3
Furthermore, 340B creates direct costs for taxpayers through the risk of duplicate discounts with other federal health programs. Federal law prohibits manufacturers from being required to provide both a 340B discount and a Medicaid rebate on the same drug. However, in practice, the lack of any substantive transparency requirements and an upfront discount model create opportunities for duplicate discounts to occur undetected. NTU has previously noted the severity of this problem in comments4 on the Health Resources and Services Administration’s 340B rebate pilot:
While not strictly “pay and chase,” 340B shares some traits with the wasteful programs that wholly embrace this scheme. The covered entity designation involves a vetting process that can offer some level of protection against improper payments (sometimes but not always fraudulent), but the system affords less such protection when day-to-day claims are involved. In 20185 and again in 2020,6 GAO noted the problem of duplicate discounts, whereby manufacturers end up providing the same medication at a 340B markdown price as well as a Medicaid rebate. The proliferation of contract pharmacies participating in 340B, which increased 20-fold over the space of nine years (2010–2019) due to relaxed restrictions in the Patient Protection and Affordable Care [Act], created numerous points of entry where duplicate discounts could occur. Worse, as GAO and others7 have pointed out, federal oversight has been especially deficient, with GAO noting in 2018 that ‘HRSA had not issued guidance as to how covered entities should prevent duplicate discounts in Medicaid managed care and thus, did not include reviews of covered entities’ processes to prevent duplicate discounts for drugs dispensed through Medicaid managed care in its audits of the entities.’
340B is also contributing to consolidation throughout the health care sector. Qualifying providers are incentivized to boost their 340B revenue by acquiring independent physician practices that administer outpatient drugs. Once these clinics are folded into a 340B-eligible hospital system, these treatments become far more profitable because of discounted purchases and full reimbursement rates.
Hospital markets already suffer from a stunning lack of competition, and 340B is only aggravating the problem. In 2022, nearly half8 of all metropolitan areas across the country had just one or two hospital systems controlling the market for inpatient care, and, by 2024, nearly 80% of physicians nationwide were employed by hospitals or other corporate entities.9 This lack of competition raises prices for patients, insurers, and government health plans.
According to the Department of Health and Human Services, hospital-to-hospital mergers in concentrated markets can raise prices anywhere from 6% to 65%.10 Even when hospitals acquire smaller independent physician practices, prices for identical medical services from those doctors rise on average by 14%. It is no coincidence that hospital care is the single largest component of national health expenditures in recent years: between 2022 and 2024, hospital services accounted for 40% of the overall growth in national health spending.11
Consolidation is not uniformly a harmful trend, and can be the result of market forces driving firms and industries to a size that maximizes efficiency and consumer welfare. Yet, when public policy artificially manipulates consolidation or dissolution, taxpayers are rightfully concerned. Lack of site neutrality for Medicare payments, state certificate of need laws, and, of course, the 340B program all contribute to consolidation.
The federal government spends more than $1.8 trillion12 annually on health care, and, between 2026 and 2056, the share of federal noninterest outlays consumed by major health care programs is projected to rise from 30% to 38%.13 Against this backdrop, allowing 340B’s perverse incentives to keep upward pressure on hospital spending is a profound disservice to taxpayers. As such, NTU commends Chairman Cassidy for unveiling the 340B Drug Pricing Integrity and Affordability for Patients Act Discussion Draft. 340B is long overdue for reform, and this discussion draft contains practical policy proposals that will improve access to care for vulnerable patients while minimizing undue burdens on federal health programs. While Chairman Cassidy’s discussion draft contains numerous reforms, NTU would like to highlight several proposals that are particularly impactful and warrant special attention.
First, NTU strongly supports section 4’s creation of a statutory definition of a 340B patient. Congress’s failure to specify who qualifies as a patient is among the biggest reasons this program has devolved into a wasteful form of corporate welfare for large hospital systems. Under this proposal, providers would only be allowed to generate revenue from patients’ 340B prescriptions if “the patient has received outpatient care in the last two years, maintained a relationship with the covered entity, and the prescription is written by one of the covered entity’s practitioners.”14 This straightforward definition establishes a clear nexus between covered entities, patients, and the drugs that receive 340B discounts.
NTU also supports section 2’s reforms to 340B’s payment architecture, which would allow drug manufacturers to elect to offer retroactive rebates to covered entities. As discussed above, 340B’s current upfront discount model opens the door to duplicate discounts and remains a key vulnerability for improper payments. Under a rebate approach, hospitals would pay the full list price at the point of purchase and then receive a payment from the manufacturer. It is precisely by creating an auditable transaction trail that a rebate model would mitigate the risks of duplicate discounts between 340B and other federal health programs such as Medicaid.
Crucially, the discussion draft also enacts sensible reforms to 340B’s sprawling network of contract pharmacies, which has played a critical role in spurring the program’s rapid growth over the past decade. Before 2010, hospitals that lacked an in-house pharmacy were allowed to partner with a single outside pharmacy to dispense 340B drugs. However, guidance issued during the Obama Administration allowed covered entities to contract with an unlimited number of outside pharmacies. The number of contract pharmacies subsequently increased nearly twentyfold, surging from approximately 1,300 in 2010 to more than 25,000 by 2020.15
Without any transparency requirements or statutory safeguards regarding where prescriptions are filled or how patients benefit, contract pharmacies are increasingly used by covered entities to channel prescriptions into affluent and well-insured areas to maximize 340B revenue.16 This has caused 340B to drift even further from its original purpose of serving as a safety net for low-income and uninsured patients. Fortunately, the discussion draft proposes new requirements for contract pharmacies, including compliance procedures to prevent diversion and duplicate discounts. Importantly, the proposal also imposes limits on where and how many contract pharmacies certain covered entities are allowed to use. While the final version of the draft may have a different calibration of the allowable number and location of these pharmacies, it is vital that some reasonable benchmark be established to evaluate its programmatic impact going forward.
Finally, we wish to share the experiences of NTU’s State Government Affairs team, which has confronted numerous bills from state legislatures that would modify their rules for the 340B program in fiscally harmful ways. NTU has encountered various kinds of 340B expansion legislation in more than two dozen states over the past two years. Most of them have in common codifications that allow the proliferation of contract pharmacies and a marked absence of transparency or payment integrity requirements. As an example, in 2024, NTU Senior Vice President of State Affairs Leah Vukmir, who served as a State Senator, testified regarding a bill in Michigan with dangerous consequences:
[A]s you examine HB 1179, please consider the effects this bill may have on overall healthcare spending in your state, specifically the cost of providing healthcare to the nearly 50,000 Michigan state employees. Many 340B entities are billing insured patients in state health plans at higher costs than their discounted acquisition costs. In the case of state employees, this means their copays are based on a list price not the discounted price. A recent report released by North Carolina State Treasurer Dale Folwell shows the extent to which hospitals in the 340B Program in North Carolina are overcharging cancer patients through the state’s health plan. Patients are being charged at an average rate greater than five times the cost of cancer drugs. These higher rates are being borne on the backs of patients and all taxpayers in North Carolina. This report only considers cancer medications, so the full extent to which patients and taxpayers are being burdened is not known. Currently, the North Carolina State Health Plan faces a $32 billion unfunded healthcare liability.17
NTU is pleased to see that several of the concerns and reforms discussed above, reflecting both our federal and state-level experience, are being addressed through this draft. We urge the Senate as well as the House to continue this important process.
We commend Chairman Cassidy’s efforts to reform and strengthen 340B. Enacting the commonsense policies outlined in this discussion draft will help ensure savings from discounted drugs reach vulnerable patients while mitigating the distortions that needlessly inflate health spending. Thank you for your consideration of these comments, and, should you have any questions on 340B or any other matter regarding federal prescription drug policy, we are at your service.
Sincerely and respectfully,
Alexander Ciccone, Policy and Government Affairs Manager
National Taxpayers Union
1 The Great 340B Healthcare Grift - WSJ
2 Opinion | 340B drug discounts for hospitals have become corporate welfare - The Washington Post
3 340B Expansion in Tennessee Will Exacerbate Drug Prices and Lead to Legal Challenges - Publications - National Taxpayers Union
4 https://www.ntu.org/publications/detail/340b-rebate-pilot-can-provide-valuable-lessons-for-future-reform
5 See the GAO report at: gao-18-480.pdf.
6 See the GAO report at: gao-20-212.pdf.
7 GAO’s 2020 report helpfully provides the following background material that could inform HRSA’s pilot design: Department of Health and Human Services, Office of Inspector General, State Efforts To Exclude 340B Drugs From Medicaid Managed Care Rebates, Report Number OEI-05-14-00430 (Washington, D.C.: June 2016); National Association of Medicaid Directors, NAMD Working Paper Series, Medicaid and the 340B Program: Alignment and Modernization Opportunities, (Washington, D.C.: May 13, 2015); and Medicaid and CHIP Payment and Access Commission, Issue Brief, The 340B Drug Pricing Program and Medicaid Drug Rebate Program: How They Interact, (Washington, D.C.: May 2018).
8 One or Two Health Systems Controlled the Entire Market for Inpatient Hospital Care in Nearly Half of Metropolitan Areas in 2024 | KFF
9 More docs working under hospitals, corporate entities in 2024
10 Health Care Provider Consolidation • Bipartisan Policy Center
11 Hospital Spending Accounted for 40% of the Growth in National Health Spending Between 2022 and 2024 | KFF
12 https://www.cbo.gov/publication/61951
13 The Long-Term Budget Outlook Data: 2026 to 2056 | Congressional Budget Office
14 SxS 340B Drug Pricing Integrity and Affordability for Patients Act Discussion Draft.pdf
15 340B Program Must Be Reformed to Achieve Its Intended Purpose - Publications - National Taxpayers Union
17 NTU Testimony: Limit 340B Program Expansion Without Transparency - Publications - National Taxpayers Union