The Mackinac Center announced on X that the federal 340B drug pricing program allows hospitals and contract pharmacies to profit from discounted drugs, with little evidence that patients benefit from the savings, a concern that’s drawing attention in New York.
According to the Mackinac Center, the 340B Drug Pricing Program—established by Congress in 1992—was designed to help hospitals provide affordable medications to uninsured and low-income patients but has since become a source of revenue for hospitals and contract pharmacies. The Center argues that hospitals often purchase drugs at steeply discounted prices, resell them at full cost, and retain the profit, with no federal requirement to pass savings on to patients. Policy experts at the Mackinac Center stated that this dynamic has transformed a well-intentioned public health program into a mechanism of government favoritism, distorting competition and disproportionately benefiting large hospital systems.
According to a 2023 report by the U.S. Government Accountability Office (GAO), the 340B program has grown significantly over the past decade, with more than 2,600 hospitals and over 50,000 contract pharmacies now participating nationwide. The GAO found that many covered entities fail to demonstrate that the savings are used to reduce costs for patients or to expand access to care for vulnerable populations. The Mackinac Center cited this finding as evidence that the 340B program has expanded beyond its intended scope, creating a parallel revenue system for hospitals while reducing transparency and accountability within the healthcare market.
PhRMA reported that 113 hospitals in New York participate in the 340B program, collectively holding over 6,000 contracts with pharmacies across the country. Just 24% of these pharmacies are located in medically underserved areas, and 86% of participating hospitals provide below-average charity care, prompting debate over whether the program is serving its intended populations.
The Mackinac Center for Public Policy is a Michigan-based nonprofit research and educational institute founded in 1987 that advocates for free-market principles, limited government, and individual liberty. The organization produces policy research, publishes commentary, and provides legislative analysis on topics including healthcare reform, taxation, and economic growth. Through its advocacy work and independent research, the Mackinac Center seeks to inform policymakers and the public about how market-driven solutions can create more accountable and efficient governance.
