Joe Grogan, former Director of the Domestic Policy Council under the Trump Administration, has expressed concerns about the misuse of the 340B drug discount program by nonprofit hospitals and pharmacy benefit managers. He said that this misuse is detrimental to small pharmacies.
“There are a lot of government programs that have gotten out of control,” said Grogan. “340b is Exhibit A. Nonprofit hospitals are using this program as a ‘get rich quick’ scheme. PBMs are exploiting the program, manipulating prices, pushing small-run pharmacies out.”
According to the Health Resources & Services Administration (HRSA), the 340B Drug Pricing Program was established in 1992 to allow eligible healthcare organizations to purchase outpatient drugs at reduced prices. The program aims to help these organizations stretch limited federal resources and support care for underserved populations. However, there are growing concerns about whether some entities are using the savings from the program as intended.
A report from the Medicare Payment Advisory Commission (MedPAC) in 2023 highlighted that hospitals participating in the 340B program often earn significant margins on drugs, particularly oncology drugs. This situation has raised questions about whether these benefits are contributing to provider consolidation and acquisition of medical practices, leading policymakers to scrutinize if these margins align with the original mission of the program.
PhRMA reports that 25 hospitals in New Jersey participate in the 340B program, holding 547 contracts with pharmacies across the country. Of these contract pharmacies, only 18% are located in medically underserved areas, which may affect the program’s intended impact. Furthermore, 16% of participating hospitals in New Jersey provide charity care at levels below the national average.
Grogan currently serves as Chairman of the Board at the Paragon Health Institute and is a Fellow at the USC Schaeffer Center. He previously held positions as Assistant to the President and Director of the Domestic Policy Council, as well as Associate Director for Health Programs at the Office of Management and Budget.
