(The Epoch Times)—Hospitals that benefit from a government program intended to help safety-net institutions end up spending less on charity care than other hospitals, a new study has found, as federal policymakers move to reform the $244 billion initiative.
The 340B Drug Pricing Program allows certain healthcare providers to buy prescription drugs at a steep discount and sell them to patients at retail prices, keeping the difference to supplement their income.
The program was created more than 30 years ago to give a financial boost to rural hospitals, hospitals serving a disproportionate share of Medicaid patients, and other safety-net healthcare providers.
The Affordable Care Act, also known as Obamacare, allowed many more hospitals to join the program. At the same time, hospitals, physician practices, and other providers were consolidating into large healthcare conglomerates.
Within a few years, the 340B program swelled from a relatively small initiative by federal standards to a major revenue source bringing billions of dollars a year into increasingly larger healthcare systems.
Now, a report from the Pioneer Institute shows that hospitals participating in the program spend less on charity care than do other hospitals.
Income Up
The markup on those drugs netted the covered entities more than $142 billion that year, a margin shared with contract pharmacies and vendors, Berkeley Research Group (BRG) estimated. In some cases, they bought the products for as little as one cent.
That’s possible, in part, because the hospitals don’t have to handle the sales directly. They can sell them through outside contract pharmacies as long as the prescription was written for a patient of the hospital by any physician working at a site the hospital owns.
The 1,150 participating hospitals operated more than 28,000 off-site entities in 2025, including physician practices, outpatient surgery centers, and other freestanding healthcare facilities.
From 2020 to 2025, 340B sales grew by 152 percent, nearly three times the growth of all drug sales in the United States, with margins more than doubling, according to BRG.
Patients and payers spent $244 billion on drugs bought under the program last year, BRG found. These drugs cost covered entities $100 billion, according to data from the Health Resources and Services Administration.
The law does not specify how hospitals and other covered entities must spend the profits.
A report funded by PhRMA, a trade group representing drugmakers that provide the 340B discount, found that 60 percent of the money spent on drugs bought under the program “is retained as profit by hospitals, clinics, and their for-profit partners.”
The American Hospital Association said growth in the program is directly linked to the drug prices pharmaceutical manufacturers set.
“Growth in the program reflects decisions made to expand its reach to underserved populations, including children, cancer patients, and rural communities,” former American Hospital Association CEO Rick Pollack wrote in an op-ed published by The Washington Post earlier this year responding to criticism of the 340B program. “The more drug companies charge for drugs, the greater the discounts and the larger the growth in the program.”
Charity Care Down
Only certain hospitals and clinics are eligible for the 340B program, and all of them are nonprofits.
Nonprofit hospitals receive other benefits, including tax exemption, in exchange for their commitment to provide benefits to their communities. Those benefits include free and discounted services – often called charity care – to patients who cannot afford care.
Yet 340B hospitals spend a smaller share of their operating budgets on charity care: 2.16 percent compared to 2.82 percent at other hospitals, including for-profit hospitals, according to a Pioneer Institute study of 3,999 hospitals.
“The study does not claim that joining 340B causes hospitals to provide less charity care. It shows that the discount does not reliably translate into more help for patients, and that current reporting rules give the public no way to see how 340B savings are used,” the Pioneer Institute’s web summary of the report states.
The 340B hospitals underperformed across multiple charity care measures. These hospitals spent 29 percent less on care for uninsured patients.
According to a 2023 study from Alliance for Integrity and Reform of 340B, two-thirds of 340B disproportionate share hospitals ranked below the national average of 2.5 percent of operating costs in charity care spending. One-third (36 percent) dedicated less than 1 percent of their resources to charity care.
Bharath Krishnamurthy, director of pharmaceutical policy at the American Hospital Association, told The Epoch Times that “a long line of misleading studies” wrongly singles out charity care as the only way to measure how hospitals provide for their patients and communities.
“340B hospitals use their savings in a multitude of ways to maintain, expand, and improve access to care for patients that address the unique needs of the communities they serve,” Krishnamurthy said.
The American Hospital Association estimated that 340B hospitals provided nearly $100 billion in total benefits to their communities in 2022.
Little Oversight
The 340B program was created for providers on federal grant budgets that had to treat patients whether they could afford the care or not, and Congress included very little oversight into the law that created it.
According to a 1992 House committee report, the goal was to allow these providers to “stretch scarce Federal resources as far as possible, reaching more eligible patients and providing more comprehensive services.”
Currently, no federal rule requires 340B hospitals to report how much they receive through the program or how they use that money.
“Revenue is revenue,” Bon Secours Mercy Health, a nonprofit healthcare system with more than 1,200 sites, said in response to a 2023 congressional request for information on the hospital’s use of the 340B revenue. “All revenue is used to pay for expenses incurred in pursuit of our mission.”
Bon Secours Mercy Health realized more than $270 million in 340B savings and revenue from 2018 to 2023.
The Cleveland Clinic’s 340B benefit totaled $933.7 million between 2020 and 2023, and it applied the benefit “to the health system’s overall operating expenses and revenues” to offset the cost of and invest in community healthcare services.
“There is no dollar-for-dollar ‘pass on’ requirement to patients under the 340B statute,” the Cleveland Clinic wrote to Congress.
William Smith, a senior fellow at the Pioneer Institute, wrote in a summary of the Pioneer Institute study that he thinks that’s a bad idea.
“A discount this big shouldn’t be a mystery,” Smith said. “If it’s reaching the patients in need, that’s the easiest thing for the institutions to prove, but none of those hospitals do, because no one has ever had to.”
Money Flows to For-Profits
Hospitals participating in the 340B program are nonprofits, but they enter business relationships with pharmacies that dispense drugs on their behalf. In Minnesota, these contract pharmacies and third-party administrators capture about 16 percent of the revenue flowing through the program, according to a report from the Minnesota Department of Health.
Contract pharmacies often get flat fees of $6 to $15 per prescription, and some also retain up to 20 percent of the revenue from prescriptions filled for insured patients, according to a sampling of insurance contracts by the Government Accountability Office in 2018.
Five companies account for 77 percent of all 340B pharmacy relationships. They are CVS Health, Walgreens, Walmart, Cigna, and UnitedHealth Group, according to the Drug Channels Institute, a pharmaceutical intelligence company.
“These Fortune 50 companies profit from 340B transactions without directly supporting the program’s safety-net mission,” wrote a team of scholars at the University of Southern California Schaeffer Institute.
For-profit entities reaping financial benefits from the program simply divert more resources away from 340B’s intended purpose, which is to allow safety-net hospitals to stretch scarce resources as far as possible, according to a majority staff report released last year by the Senate Health, Education, Labor, and Pensions Committee under Chair Sen. Bill Cassidy (R-La.).
Proposed Changes
Beginning next year, two federal initiatives could change how 340B discounts are paid and how much Medicaid pays for drugs under the program.
Under a pilot program starting Jan. 1, 2027, providers will pay the list price up front for certain drugs, then submit claims data to receive their 340B discount as a rebate.
The Health Resources and Services Administration said the goal is to get visibility into individual 340B transactions and avoid giving both the 340B discount and the Medicare-negotiated price on the same drug.
Hospital groups are suing to block the pilot. The Maine Hospital Association and four safety-net hospitals filed a lawsuit against the pilot program on Oct. 9. Paying market prices up front and waiting for rebates will cause struggling hospitals to cut back on patient care, the hospitals said.
In July, the Centers for Medicare and Medicaid Services (CMS) proposed a rule that would reduce the markup Medicare pays hospitals on 340B drug sales. Medicare would simply pay hospitals two-thirds of the average sales price for covered drugs, saving beneficiaries and taxpayers an estimated $5.7 billion. The rule, if finalized, would take effect on Jan. 1, 2027.
In a public comment addressed to CMS Administrator Dr. Mehmet Oz, Rep. Mike Lawler (R-N.Y.), joined by five Republican colleagues, asked to reconsider the rate reduction, saying it would result in “a nearly 40 percent reduction in payments to safety net hospitals that utilize the 340B program.”
Two Storms, One Harvest
Every food crisis in living memory has been a one-shock event. The 2008 price spike was a commodity bubble. The 2020 shortages were a logistics failure. The 2022 grain scare was a war on one exporter’s ports. Each time, the system bent, adjusted, and recovered, and each time the experts assured us afterward that global markets are simply too big and too diversified to fail.
What nobody in Washington seems eager to discuss is that 2026 is shaping up to be something the modern food system has never actually faced. Two independent shocks, one climatic and one geopolitical, are converging on the same harvest cycle at the same time. Not sequentially. Simultaneously.
Start with the weather. The Pacific Ocean is currently building toward what forecasters now openly call a record event. NOAA’s Climate Prediction Center puts the odds of at least a strong El Niño near 88 percent, with roughly two in three odds it reaches “very strong” status, the tier reserved for perhaps three or four events in the entire satellite era. Every major global model now projects a median peak in Super El Niño territory, and most of them project it exceeding the 2015-16 event, which until now held the modern record. Sea surface anomalies were already brushing the super threshold in mid-July, months before these events normally peak. The atmosphere has already shifted into El Niño mode, and the event is forecast to crest in late fall and early winter.
This is not about “climate change.” It’s about the standard cycles of weather, and the cycle we’re currently in is one that has likely devastated societies in the past. We’re better prepared as a society today, but not all Americans are equally prepared.
Serious households have started doing the quiet math on their own. Grocery bills tell part of the story, and the forecast maps tell the rest, which is why long-term food storage has moved from fringe hobby to mainstream line item in the family budget, with established suppliers like Heaven’s Harvest seeing demand from people who five years ago would have rolled their eyes at the idea. That instinct is not paranoia. It is pattern recognition, and the pattern is worth walking through carefully.
Editor’s Note: Heaven’s Harvest IS a sponsor, but the warnings of this article are real and would be written even if we didn’t have a survival food sponsor. With that said, those who take advantage of what they offer can use promo code “Patriot” for 15% off.
The Fertilizer Clock Is Already Running
While the Pacific warms, the second shock has been unfolding in the Strait of Hormuz. The conflict with Iran turned the world’s most important energy chokepoint into a contested waterway, and the consequences reach far beyond the gas pump. Roughly a third of global fertilizer trade moves through Hormuz, and the disruption sent urea prices up 86 percent year over year by March, with a 53 percent jump in a single month.
The World Bank projects energy prices rising about 24 percent in 2026 and fertilizer about 31 percent. By its own accounting, fertilizer prices ran 35 percent higher in the first five months of this year than the same period last year.
Here is the mechanism the nightly news will not explain. Fertilizer is not a grocery item. It is a time-delayed input. The nitrogen a farmer in Iowa or Punjab could not afford to apply this spring does not show up as a problem this spring. It shows up as a thinner harvest six to twelve months later.
The World Bank’s own food security brief concedes that the effects of reduced applications earlier this season “are likely to become visible only later in harvest outcomes.” Translate that from institutional language into plain English and it means this. The damage is already done, it is already in the ground, and we are simply waiting for it to arrive on the shelf.
Now check the calendar. Six to twelve months from the spring planting season lands us squarely in late 2026 and early 2027. Which is precisely when the strongest El Niño in the instrumental record is forecast to peak, bringing its signature droughts to Southeast Asia, Australia, southern Africa, northern Brazil, and South Asia, the very regions that grow the world’s rice, sugar, and oilseeds.
The World Bank warns openly that a strong El Niño “could disrupt multiple crop belts simultaneously” on top of the conflict-driven input costs. Their baseline projection assumes the Middle East disruptions ease by autumn. What in the last two years of Middle East history suggests that assumption is safe?
The System Has No Slack Left
The comfortable answer is that global markets always adjust. But adjustment requires slack, and the slack is gone. Global cereal production is expected to decline from last year’s records even before El Niño does its work. The UN World Food Programme, hardly a den of right-wing preppers, is calling this the most significant disruption to its supply chains since Covid and the invasion of Ukraine, and its supply chain director put the stakes bluntly.
Today’s supply chain challenges are tomorrow’s hunger crisis.
There is also a political dimension that markets cannot price. When food gets scarce, governments do not behave like economists. They behave like politicians. Export bans, hoarding mandates, and panic buying at the national level turned the modest rice shortfall of 2008 into a global crisis, and analysts are already warning that import-dependent nations are the first dominoes.
The 2015-16 Super El Niño, a far weaker event than what is now forecast, threw tens of millions into food stress across Africa and Asia. This one is projected to be stronger, and it arrives with fertilizer already rationed by price and shipping lanes already contested by missiles.
What Joseph Knew
Scripture does not treat preparation for lean years as faithlessness. It treats it as wisdom delivered in advance to those willing to act on it.
Behold, there come seven years of great plenty throughout all the land of Egypt: And there shall arise after them seven years of famine; and all the plenty shall be forgotten in the land of Egypt.
Joseph did not respond to that warning with a hashtag or a committee. He stored grain during the years of abundance, and when the famine came, Egypt stood while its neighbors begged. The lesson is not that famine is certain. It is that the time to prepare is precisely when preparation still looks optional.
Nobody who filled a pantry in a year of plenty has ever regretted it, and nobody standing in an empty aisle has ever been glad he waited for certainty.
None of this calls for panic, and panic is the enemy of sound judgment anyway. It calls for the same unglamorous prudence our grandparents considered ordinary. Keep some cash margin, know your local growers, and put real food in deep storage while it is cheap and available, because the entire arc of this story is that cheap and available is a closing window.
Families looking for a straightforward place to start can visit Heaven’s Harvest and use promo code Patriot for 15 percent off long-term storable food. The forecasts may yet soften, the strait may yet reopen, and we should pray they do. But hope is a fine thing to hold and a foolish thing to eat.
