Ross Marchand, Executive Director of the Taxpayers Protection Alliance, said on the Health Policy Podcast that the 340B drug pricing program is being misused by hospitals that keep discounts instead of passing savings to patients, an issue attracting attention in New Jersey.
“The 340B program is being abused, and the hospitals are taking these discounts from these drug companies, which is mandated by the federal government,” said Marchand. “Instead of passing along those savings onto patients and investing in more affordable care, what they’re doing is charging full price or nearly full price, and they’re pocketing the difference. What you have is you have a program that has noble intentions, but is failing because of these unintended consequences, and patients lose and taxpayers lose as a result. Whenever you have a complicated government program, the people who are closest to the action, who are supposed to take center stage, they find out quickly how these rules can be abused and they steer it to their own benefit and then everyone else loses.”
Created by Congress in 1992, the 340B Drug Pricing Program mandates Medicaid-participating manufacturers to sell outpatient drugs at discounted prices to eligible “covered entities.” The Health Resources and Services Administration (HRSA) oversees this program to help providers stretch scarce resources. However, according to recent Government Accountability Office (GAO) reviews, there are persistent vulnerabilities such as duplicate discounts and gaps around contract pharmacies. The GAO recommends further actions to strengthen oversight.
The Congressional Budget Office (CBO) reported in 2025 that purchases of 340B-priced drugs increased from $6.6 billion in 2010 to approximately $44 billion by 2021, surpassing overall drug-spending growth. The CBO highlighted budget implications due to the program’s expansion and raised concerns about current rules enabling arbitrage, with institutions and intermediaries capturing discounts rather than consistently reducing patients’ out-of-pocket costs.
Analyses of the 340B contract pharmacy market in 2025 indicate that large chains and their affiliated Pharmacy Benefit Managers (PBMs) are tightening control, making 340B a growing profit center for retail pharmacies and PBMs. Industry tracking notes a rapid proliferation of contract pharmacy arrangements and spread-capture opportunities when discounted drugs are reimbursed at higher rates, diluting patient benefits relative to institutional and PBM gains.
New Jersey’s S2067 proposes Medicaid reimbursement rules that would generally calculate payment for 340B “covered outpatient drugs” dispensed by a covered entity based on the lower-of methodology, including an Actual Acquisition Cost cap tied to the federal 340B ceiling price (plus a state dispensing fee)—a sign of in-state scrutiny on how much margin entities can retain on discounted drugs.
The TPA identifies itself as a non-partisan nonprofit focused on taxpayer and consumer interests. Its leadership page lists Marchand as Executive Director. Founded in 2011 and based in Washington, D.C., the group advocates for transparency and against wasteful spending, providing context for Marchand’s criticism of how 340B’s design and oversight can shortchange patients and taxpayers.
