Sally Pipes, President and CEO of the Pacific Research Institute, said the 340B program’s structure drives consolidation and higher costs by rewarding hospitals for acquiring clinics and marking up discounted drugs — an issue garnering attention in New York. The statement was made on the social media platform X.
“The 340B program has fueled major consolidation in healthcare”, said Pipes. “When 340B hospitals buy up clinics, each becomes a new entity that can buy discounted drugs and sell them at huge mark-ups — reducing competition, narrowing patient choices, and driving costs up”
According to the Congressional Budget Office’s Sept. 2025 analysis, 340B’s rapid expansion was propelled by post-2010 guidance allowing unlimited contract-pharmacy arrangements. CBO also flags “increased vertical integration” by hospitals, greater ownership/affiliation of outpatient sites as a factor shaping spending, echoing concerns that program incentives can reinforce consolidation and site acquisitions.
A 2024 Health Affairs Scholar study revealed hospitals in the 340B Drug Pricing Program generated substantial profits from discounted drug purchases, with limited evidence that those savings improved access or affordability for low-income patients. The researchers concluded that most 340B hospitals did not provide higher levels of charity care compared to non-340B institutions.
In New York, only 24% of 340B contract pharmacies are located in medically underserved areas. Meanwhile, 86% of the state’s 340B hospitals provide charity care at rates below the national average. Employers are estimated to absorb an extra $445 million each year in lost rebates tied to 340B claims, costs that can ultimately be passed on to workers.
Sally C. Pipes leads PRI as President, CEO, and Thomas W. Smith Fellow in Health Care Policy. She has headed the California-based think tank since 1991 and writes widely on drug pricing and delivery reform. Her PRI role and long tenure establish her as a prominent voice advocating for 340B changes aimed at aligning program benefits with patients rather than institutional margins.
