Posted on Wednesday, October 1, 2025
|
by Outside Contributor
|
0 Comments
|
In the ongoing quest to bring drug price relief to everyday Americans, the Trump Administration just proposed an idea offering real reform.
The best part? It avoids counterproductive price controls or violations of the patent rights that fuel lifesaving pharmaceutical innovation.
At issue is Section 340B of the Public Health Service Act passed in 1992 to help hospitals – especially those serving low-income and uninsured populations – to purchase pharmaceuticals from drug manufacturers at significantly discounted prices.
In theory, those savings for hospitals should have translated into lower out-of-pocket prices for everyday patients by being passed along to them.
Since 1992, however, real-world practice has not lived up to that laudable Congressional intent. As the number of participating hospitals and pharmacies has grown, oversight has failed to keep pace with the scale and complexity of the program.
As a result, hospitals and their partner pharmacies have increasingly exploited the 340B program in ways that bring significant revenue streams for themselves, but no demonstrable benefits for the consumers who were the law’s original intended beneficiaries. Multiple studies examining the growing discrepancy have exposed how hospitals and their partners generate tens of billions of dollars each year from 340B drug sales. Rarely, however, have those funds been passed on to patients in the form of lower drug prices or even reinvested into better patient care.
Outrageously, some hospitals even charged full prices to patients for pharmaceuticals discounted under the 340B program, and then pocketed the difference rather than pass them on to consumers as designed. The federal agency in charge of administering the 340B program has highlighted those transparency concerns and an inability to accurately audit the program in practice.
Accordingly, since 1992 the 340B program hasn’t fulfilled its intended aspirations. Instead of reducing drug costs for patients, it has too often incentivized hospital profiteering, distorted healthcare behavior and ultimately raised costs rather than lowering them.
That’s where the Trump Administration’s new proposal comes in.
Its 340B Rebate Model Pilot Program will restructure how the program operates in order to eliminate abuse and improve accountability, ultimately passing the law’s benefits to consumers rather than hospitals.
Most importantly, the Trump Administration’s proposal would shift the 340B mechanism from one that currently grants up-front drug price discounts to hospitals to one that would instead require hospitals to file claims with drug manufacturers for rebates. By providing retroactive rebates rather than up-front discounts, the reformed program would create a paper trail to help prevent hospitals from double-dipping on discounts and improve auditability.
The Trump Administration’s proposal parallels other federal drug pricing programs that have proven successful, including the Medicaid Drug Rebate Program of 1990 and the Department of Veterans Affairs Federal Supply Schedule. Both brought improved auditability that in turn enhanced transparency and program integrity, so the 340B Rebate Model Pilot Program follows an effective model of reform.
In order to ensure maximum effectiveness, however, the Trump Administration mustn’t limit its proposal to an artificially small number of outpatient drugs.
Doing so would leave gaps in the program and allow hospitals to continue exploiting non-covered drugs for their own enrichment. Not including all drugs within the reform proposal would also complicate compliance, because participants would have to navigate parallel systems, with one set of drugs still subject to up-front discounts while others would be subject to the new rebates. By applying the proposal to all medicines within the 340B program, the reforms at issue can reduce complexity and maximize the benefit for consumers.
Accordingly, the Trump Administration’s proposal, if implemented with sufficient breadth in terms of drugs it covers, offers the promise of real reform on drug prices at long last.
While the 340B program as originally created sought to lower patients’ drug costs, its integrity and effectiveness have eroded in subsequent years due to lack of oversight and exploitation of loopholes.
American consumers deserve a 340B program that more faithfully fulfills its original mission of lowering drug costs while avoiding price controls and patent infringements that would undermine American pharmaceutical innovation. The Trump Administration’s proposal offers the possibility of finally making that happen.
Timothy H. Lee is Senior Vice President of legal and public affairs at the Center for Individual Freedom.
Reprinted with Permission from CFIF.org – By Timothy H. Lee
The opinions expressed by columnists are their own and do not necessarily represent the views of AMAC or AMAC Action.
Read full article here