In 1995, one pharmacy in the United States dispensed discounted drugs under the 340B programme on behalf of a covered entity it did not belong to.
By 2024 the figure was 32,528.
Nothing in the statute changed to produce that. The number is the whole argument about 340B, and both bills now in front of Congress are attempts to explain it.
What the programme actually requires
340B lets certain hospitals and clinics — those serving disproportionate numbers of low-income patients — buy outpatient drugs from manufacturers at a steep statutory discount.
It does not require them to pass the discount on.
A covered entity buys at the 340B price, dispenses to an insured patient, and bills the insurer at the ordinary rate. The difference stays with the entity. That is not abuse; it is the design. Congress intended the margin to fund uncompensated care, and for a genuine safety-net hospital it frequently does exactly that.
But a subsidy that arrives as a spread rather than as a payment has no natural stopping point. There is no line item, no reconciliation, and no patient-level test. The programme's size is therefore determined not by how much charity care is needed but by how many prescriptions can be routed through an eligible entity.
The contract pharmacy is the mechanism
A covered entity has its own pharmacy, and its own patients. A contract pharmacy is a retail chain location that dispenses on the entity's behalf and takes a fee.
The arrangement began as a solution to a real problem: a rural clinic without a dispensary needs somewhere for its patients to collect medicines. Extended, it means an entity's 340B footprint is no longer bounded by its buildings. Any prescription written by an affiliated provider and filled anywhere in a national chain can be claimed at the discount.
That is how one becomes 32,528. Each individual link is defensible and the aggregate is a programme operating at a scale nobody legislated.
Two bills, two diagnoses
The SECURE 340B Act treats it as a transparency failure. It would oblige covered entities to publish patient financial assistance policies and extend them to child sites and contract pharmacies, and would let the Secretary audit entities, contract pharmacies, child sites and manufacturers — for improper eligibility, diversion, duplicate discounts and contract pharmacy use.
The SUSTAIN 340B Act treats it as a scale failure. It would cap contract pharmacies at five per covered entity, with geographic limits.
These are not variations on a theme. One says the programme is the right size and nobody can see inside it. The other says the inside does not matter because the size is the problem. A caps rule works whether or not anybody reports anything; an audit regime works only if somebody funds and runs the audits.
This paper has made the same distinction about a different corner of the same industry, where the permission to make a scarce drug expires the moment the shortage it was granted for ends. A rule that regulates eligibility produces different behaviour from a rule that regulates volume, and legislatures routinely reach for the first when they mean the second.
Meanwhile the parties are settling it without Congress
Manufacturers have been restricting contract pharmacy access since 2020 — unilaterally, ahead of any statute, and mostly successfully.
In February a federal court in Maine vacated HRSA's rebate model pilot, which would have converted the up-front discount into a back-end rebate and, in doing so, given manufacturers visibility into which claims were 340B before paying them.
And there are allegations in litigation that a pharmacy benefit manager reduced reimbursement on 340B specialty claims and kept the difference, presenting the lower figure to hospitals as full payment. Those are contested and unproven. What makes them plausible enough to litigate is that in a programme built on a spread, every intermediary is positioned to take part of it, and none of them has to disclose that they did.
The part that gets lost
It is worth saying plainly that the hospitals defending 340B are not inventing their case. Safety-net providers do rely on the margin, it does fund care that nothing else pays for, and capping contract pharmacies at five would take real money out of institutions serving people with no alternative.
The difficulty is that the programme cannot distinguish between that hospital and one using the same mechanism at the same scale for a different purpose, because it was never built to ask. This is the same structural fault this desk found in hospital price data: the information required to tell one case from another is not collected, so the argument runs on anecdote from both directions.
What to watch
Not which bill advances, since neither is likely to move intact.
Watch whether any version keeps the audit authority over manufacturers as well as covered entities. Every previous attempt to discipline 340B has audited only the buyers, which is why the programme's contested numbers have always come from one side. An audit regime that reaches both would produce, for the first time, a shared set of facts about who is capturing the discount.
That would be worth more than either cap, and it is the provision most likely to be traded away.
The growth in 340B contract pharmacies from one in 1995 to 32,528 in 2024; the provisions of the SECURE 340B Act (H.R. 9599, 119th Congress) requiring covered entities to maintain and extend patient financial assistance policies to child sites and contract pharmacies with transparent public reporting, and authorising the Secretary to audit covered entities, contract pharmacies, child sites and manufacturers for improper eligibility claims, diversion, duplicate discounts and contract pharmacy use; the alternative SUSTAIN 340B Act proposal to limit covered entities to five contract pharmacies with geographic restrictions; the restriction of contract pharmacy access by manufacturers since 2020; and the vacatur of HRSA's 340B Rebate Model Pilot Program by the US District Court for the District of Maine on 10 February 2026 are as reported by Congress.gov, Becker's Hospital Review, 340B Report, HFMA and the Paragon Health Institute during 2026. Allegations that a pharmacy benefit manager deflated 340B specialty reimbursement and retained the difference are contested claims in litigation, are described as allegations here, and no finding has been made. The analysis is our own.
Topics healthdrug pricinghospitalspharmacy
