Minnesota Scrutinizes the 340B Drug Discount Program
Congress created the 340B program in 1992 to fix a problem it had created two years earlier when it implemented price controls, or rebates, in the Medicaid drug benefit program. As a condition to participate in Medicaid, pharmaceutical companies must also partake in the 340B program, giving significant discounts of between 20-50 percent, to certain federally-funded facilities and disproportionate share hospitals that receive extra government subsidies to treat large numbers of low-income people on Medicare and Medicaid, as well as indigent, uninsured patients.
Citizens Against Government Waste (CAGW) first expressed its concerns over the 340B program in 2014, and has since published blog posts, op-eds, and other commentary about the shortcomings of the program. Because the law does not require covered entities to pass along the drug savings to their patients and there is no clear definition of a 340B patient, many hospitals and contract pharmacies have figured out how to turn it into a cash cow.
Minnesota is continuing its efforts to increase transparency over 340B spending by covered entities in its state. On February 27, 2026, the Minnesota Department of Health (MDH) issued its 340B Covered Entity Report, which found that in 2024, 340B hospitals and clinics in the state generated $1.34 billion in program revenues. The largest 340B hospitals in Minnesota garnered more than 80 percent of all net 340B revenues in the state, even though those hospitals only represent 12 percent of all participating entities in the states, and hospitals spent only $12 out of every $100 in gross 340B revenue on operating their programs. The MDH report found that state safety net clinics like tribal health centers and federally qualified health centers received less than one percent of the total net 340B revenues in Minnesota.
This report further exemplifies why Congress must review and repair the 340B program. More states should follow Minnesota’s example and shed more light into how the 340B program is being used and abused.
