A controversial program to subsidize safety-net hospitals’ drug spending “has expanded beyond its original intent,” incentivizing provider consolidation while doing little to better serve patients’ needs, Department of Health and Human Services policy heads wrote in a new report.

The 340B Drug Pricing Program was established under statute in 1992, but in recent years has been besieged on all sides as its scale ballooned to more than $100 billion of purchases in 2025. While drugmakers have sought to impose limits on hospitals’ use of the program, citing integrity concerns and expansions beyond congressional intent, providers contend the discounts are more important than ever as operating pressures like rising supply costs and policy-driven revenue cuts mount.

The administration began taking its own actions to rein in the program, including a pilot rebate program set to begin with the new year and a proposed rule that would trim 340B reimbursements from the current average sales price (ASP) plus 6% down to 33.4% below ASP.

On Thursday, an HHS Office of the Assistant Secretary for Planning and Evaluation (ASPE) report brief (PDF) made the department’s views on 340B’s shortcomings crystal clear while offering new numbers backing up the proposed reimbursement changes that have so far been lambasted by the hospital industry.

Because of the substantial margin between discounted prices and reimbursement rates, the brief reads, “covered entities are incentivized to consolidate practices and engage in anticompetitive behavior in order to maximize their spread revenue. Consumers can be harmed by related increases in healthcare costs and clinical choices that are made to increase revenue over patient outcomes,” it reads in reference to coinsurance requirements tied to reimbursement rates as well as providers’ financial incentive to administer high-cost, high-discount drugs.

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