Most of us know a duplicate discount when we see one, whether that’s getting paid for a missing package by both the delivery service and the seller, or receiving credit for a return from the store and a refund from your bank. Most systems, including the federal government, go out of their way to prevent this double dipping. Yet, one federal program continues to fly under the radar without repercussions.
Meant to be a lifeline to help patients in need access medicines, the 340B Drug Pricing Program has strayed far from its mission. Recent evidence shows that program savings are often not used to benefit patients as intended. This summer, the Health Resources and Services Administration (HRSA) rolled out a update of a pilot program aiming to reel this problem in and give Washington a chance to make meaningful progress for patients.
340B is a federal healthcare program that requires pharmaceutical companies to give deep discounts to certain safety net hospitals and clinics with savings intended to help treat low-income patients. Since it was established, however, many large hospital systems have taken advantage of the lack of transparency, marking up drugs they purchased at a discount and pocketing the spread instead of passing savings to patients. 340B hospitals spend just over two percent of their operating expenses on charity care — below the national average for non-340B hospitals.
Duplicate discounts compound this abuse. Federal law bars 340B hospitals from getting paid twice for the same prescription, but that’s exactly what happens when a 340B hospital buys a drug at the discounted 340B price, dispenses it to a Medicaid patient, and collects a rebate from Medicaid. According to one estimate, at least six percent of Medicaid rebate claims involve duplicate discounts. Because Medicaid paid for 751 million prescriptions in 2024, that means at least 45 million involved a duplicate discount and violated federal law.
The General Accountability Office (GAO), a government watchdog, has been warning about duplicate discounts for many years. GAO scolded the Centers for Medicare and Medicaid Services (CMS) for failing to improve 340B oversight and curtail duplicate discounts in January 2020. Even before that, the Department of Health and Human Services (HHS) Inspector General warned in 2014 and 2016 that pharmacies contracting with 340B hospitals were failing to prevent duplicate discounts.
Because 340B hospitals, their contract pharmacies, and Medicaid agencies and their Medicaid managed care plans benefit financially from duplicate discounts, sometimes paying nothing for their drugs, very little has been done to prevent these consistent violations. There is, however, an easy solution.
As of January 2026, Eli Lilly has required 340B hospitals and pharmacies they contract with to share claims data to receive 340B prices. Hospitals that fail to share that data are denied the discount. Now, Washington is testing whether a similar concept could function as a program-wide fix and steer 340B toward greater transparency.
First introduced by HRSA in 2025, the newly revised 340B Rebate Model Pilot Program would allow manufacturers to provide 340B discounts as rebates once the 340B entity proves the claim was eligible. By building that check into the system instead of blindly trusting that a prescription wasn’t also billed to Medicaid, the rebate model would increase accountability for participating entities and move the program closer to fulfilling its original purpose.
Unsurprisingly, large hospital systems are arguing that they cannot comply with this proposal. Let’s be frank. These large hospitals make millions, if not billions, from violations of federal law — 340B purchases reached a record $100 billion in 2025. They are balking because complying with the requirement might end that gravy train. 70 percent of 340B hospitals already comply with Lilly’s program. It seems unlikely that large systems can’t figure out what hundreds of smaller hospitals already have.
HRSA and HHS are in difficult positions. Hospital lobbyists are demanding that the government stop the Lilly program and the revised rebate model, claiming that they “impose massive new administrative and financial burdens on hospitals.” Yet, these proposals do precisely what the Inspector General for HHS has recommended for a decade by increasing visibility into program operations.
It will be interesting to see if Washington buckles and allows the persistent violation of federal law because of pressure from the hospital lobby. If HRSA follows through, they have the opportunity to not just resolve the issue of duplicate discounts but take a critical step toward embedding the transparency needed to restore 340B to its original patient-centric mission.
William S. Smith, PhD is Senior Fellow and Director of the Life Sciences Initiative at Pioneer Institute in Boston.
