Government leaders from both sides of the aisle have pledged to make New York a more affordable place to live, work, and own a business. Unfortunately, that can’t happen if policymakers refuse to scrutinize an out-of-control prescription discount program that drains government health plans of $89 million annually and drives up private sector healthcare coverage in the state by hundreds of millions of dollars each year.
The 340B Drug Pricing Program is a clear example of a well-intended policy that has been co-opted by corporate interests, namely hospital systems and for-profit middlemen that use the program to juice revenue. The 340B framework involves a web of hospitals, chain pharmacies, and private-equity backed intermediaries all incentivized to cash in on a broken system.
What began decades ago as a targeted effort to support core safety-net providers — think public hospitals, rural clinics, and community health centers — to buy medications at steep discounts and use the savings to serve low-income and uninsured patients, has grown exponentially into a multi-billion-dollar revenue stream for sprawling healthcare systems and pharmacy chains. The program grew from $10 billion a decade ago to more than $80 billion today. It grew by a whopping 23% from 2023-2024. Despite billions of dollars poured into this program, there is no requirement that hospitals use the revenue to help uninsured patients or low-income communities. The core problem with 340B is that it allows eligible hospitals to buy drugs at a deep discount and sell them at significant mark-ups with no accountability for how those profits are used.
A recent analysis from the National Alliance of Healthcare Purchaser Coalitions finds that large hospitals in the 340B program charge commercial plans an average of 7.6% more for all services than their non-340B counterparts. This translates to a national price tag of $36 billion in excess costs each year. A program health-system executives often champion as having no cost to the public has become a drain on patients and employers already grappling with the sky-high cost of living and doing business in New York.
The program doesn’t just raise costs for private-sector health plans — it also strains state and local government budgets by driving up prices for public employee coverage too. New York leads the nation in those costs. Massive health systems have transformed a program meant to assist the most marginalized patients into a taxpayer and local business funded subsidy.
Employers, including small-to medium-sized businesses across the Empire State, are resilient. They’ve kept their doors open and operations running through challenging times. Even though the cost of doing business in New York continues to soar, employers remain committed to serving and investing in their communities. To support them, state lawmakers should focus on reducing costs and avoid legislation that would insulate unaccountable programs like 340B from oversight. Policies that incentivize program growth would further make operating a business in New York unaffordable.
Effective reform of 340B should begin with transparency and reporting mandates to expose abuse and ensure the program functions as intended while protecting employers, government budgets, and working families from rising healthcare costs. Done right, reform can preserve 340B’s role as a safety-net for underserved patients and low-income communities while curbing the misuse and opportunism that makes healthcare more expensive for everyone else.
Shawn Gremminger is the president and CEO of the nonprofit National Alliance of Healthcare Purchaser Coalitions, whose members represent public and private sectors, nonprofits, and labor unions that provide health benefits to over 90 million Americans—more than half of the employer-sponsored insurance market—spending over $850 billion annually. Rev. Carmen Hernandez is a community advocate and activist, and founding president of the NYC LGBTQS Chamber of Commerce.
