The federal 340B program was introduced to aid safety-net hospitals – institutions that serve a disproportionate share of low-income patients – through access to heavily discounted drugs at the manufacturers’ expense. The program has grown into a $100 billion enterprise, surpassing Medicaid in net drug spending1. As the program continues to expand, it raises questions about whether its largest participants are directing those savings to the intended patients.
Using the Pioneer Institute’s 340B Data Tool (340B Tool), this analysis examines charity care levels among two groups of institutions by operating expenses: the top 25 national academic medical centers and the top 340B hospitals by state. Pioneer utilizes RAND-transposed CMS Healthcare Cost Report Information System data linked to HRSA 340B covered-entity records for the charity care data. The charity care information used is provided by institutions to CMS.
Academic medical centers are hospitals with formal affiliations to medical schools or universities. Notably, all 25 academic medical centers in this analysis participate in the 340B program. Among the top 340B hospitals by state, most are also academic medical centers.
The IRS defines charity care as “free or discounted health services provided to persons who meet the organization’s eligibility criteria for financial assistance and are unable to pay for all or a portion of the services”2. Pioneer’s tool presents charity care as a percentage of operating expenses, allowing standardized comparisons across hospitals regardless of size.
We measured charity care percentages for both groups against three benchmarks. First, we compared the average charity care of non-340B hospitals in their state to that of 340B hospitals. This benchmark compares hospitals that do not receive the same discounted benefits. The second is the average charity care of 340B hospitals in their state, which shows how the largest 340B hospitals compare to smaller institutions and, lastly, to the national average for 340B hospitals.
Of the top 51 340B hospitals, most of them provided less charity care than their state’s average non-340B hospital, and an even larger majority gave less charity care than their state’s average 340B hospital. When compared to the national 340B hospital average, an overwhelming 80% fell short. The same analysis applied to academic medical centers, where 60% provided less charity care than their state’s average non-340B hospital, and 84% provided less charity care than their state’s average 340B hospital. The most striking number, however, is that 98% of AMCs did not clear the national 340B hospital average.
There is a clear disparity between the charity care of the largest hospitals and AMCs to the rest of the nation; a disparity that is costly to patients. An analysis by Milliman found that outpatient drug costs billed to insurance were significantly higher at 340B hospitals compared to non-340B hospitals3. When comparing 340B teaching hospitals to non-340B teaching hospitals, this discrepancy persists3. The difference in cost implies that 340B hospitals reap the benefits of their drug discounts by creating a profit margin with insurers. However, if they aren’t passing their discounted prices to patients with minimal charity care, then where is the difference going? For now, it’s impossible to know, but greater transparency in how these savings are used remains long overdue.
References
[1] Fein, Adam J. “The 340B Program Hit $100 Billion in 2025: Has It Become Too Big to Reform?” Drug Channels, 15 July 2026, www.drugchannels.net/2026/07/the-340b-progr am-hit-100-billion-in.html.
[2] 2025 Instructions for Schedule H (Form 990). Internal Revenue Service, 2025, www.irs.gov/ pub/irs-pdf/i990sh.pdf.
[3] Holcomb, Katie, et al. Analysis of Commercial and Medicare Outpatient Drug Spend at 340B Participating Hospitals. Milliman, Inc., July 2025, media.milliman.com/v1/media/ed ge/images/millimaninc5660-milliman6442-prod27d5-0001/media/Milliman/PDFs/2025-Articles/7-31-25_Analysis-340B-commercial-and-Medicare-outpatient-drug-spend.pdf
Gauri Binoy is a research assistant at Pioneer. She holds a B.S. in Biological Sciences and Development Sociology from Cornell University, where she developed a keen interest in healthcare systems and the factors that shape patient care. She began her career in healthcare consulting, working on operational initiatives within health systems and helping optimize hospital processes to improve patient care and efficiency. Her interest in bridging business, policy, and public health led her to pursue a joint MBA/MPH at Yale, where she spent two summers working in pharmaceutical communications strategy and health policy consulting. Across these experiences, Gauri has focused on building the skills to drive structural change and make healthcare more accessible, equitable, and patient-centered. She is now based in Boston, beginning her career in commercial pharmaceuticals at Takeda, where she is focused on bridging stakeholder strategy and execution.
James Grant is a Doctor of Pharmacy candidate at Butler University’s College of Health Professions. He is a member of the Rho Chi Pharmacy Honor Society, Phi Lambda Sigma Pharmacy Leadership Society, and Kappa Psi Pharmaceutical Fraternity. He previously served as the Philanthropy Chair of Kappa Psi, supporting the nonprofit Reach Out and Read. Currently he serves as the Vice President of both Kappa Psi and Phi Lambda Sigma and is pursuing in vitro research on dopamine receptors.
