Senate HELP Committee Questions Cleveland Clinic’s 340B Funding Transparency
The 340B Drug Discount Program was created in 1992 and requires pharmaceutical manufacturers participating in Medicaid to sell drugs to “Covered Entities” (CEs), including non-profit hospitals like the Cleveland Clinic, at discounts of 20 to 50 percent. The program grew from $9 billion in 2014 to $66 billion in 2023, making it the second-largest federal prescription drug program after Medicare.
In April 2025, the majority staff of the Senate Committee on Health, Education, Labor, and Pensions (HELP), chaired by Senator Bill Cassidy (R-La.), released a report on the 340B program that highlights the Cleveland Clinic’s receipt of $933.7 million in drug discount revenue through the 340B program from April 2020 to June 2023. The report noted that, “Cleveland Clinic realized $395.4 million in savings through physician-administered 340B drug purchases during this time period,” and “generated $538.4 million in revenue from self-administered 340B drugs dispensed through its wholly-owned and entity-owned pharmacies, as well as through third-party contract pharmacies … Of this pharmacy revenue, 52 percent was generated from its wholly-owned and entity-owned retail … pharmacies. The remaining 48 percent of revenue was generated through third-party contract pharmacies.” The HELP inquiry uncovered that the Clinic did not clearly designate any portion of its 340B savings for patient drug cost reduction, spending the money instead on amorphous and undefined “capital improvement projects” and “community benefit programs” without citing any specific benefits to patients.
As noted in a May 30, 2025, Ohio Capital Journal article, between April 2020 and June 2023, Cleveland Clinic received $933.7 million in 340B drug discounts designed to support charity care without passing those savings on to low-income patients. Instead, the clinic funneled the funds into its general budget and executive pay. The institution pointed out that there is no legal requirement to pass discount savings on to patients and claimed the savings supported overall operating costs and ill-defined “community care programs.” The clinic collected $911 million in net income in 2023 and spent $261 million providing free or reduced-cost care to needy patients. Meanwhile, it spent more than $37 million paying 22 executives more than $1 million each and another 30 executives more than $500,000 each.
The Capital Journal coverage and Senate HELP report both underscore the lack of transparency in how CEs spend their 340B subsidy revenues. Cleveland Clinic and other CEs have expanded 340B participation and spent the proceeds in non‑patient-specific ways with virtually no accountability. The Senate report calls for tighter reporting requirements to ensure that 340B funds benefit the low‑income and uninsured populations the program was meant to serve and to better define a 340B patient.
During a July 31, 2025, HELP Committee hearing on healthcare affordability, Sen. Jon Husted (R-Ohio) lamented that the 340B program is “not working.” The program, Sen. Husted explained, “doesn’t require those drug savings to be passed along to the consumer or private insurer, nor does it require the hospital use those funds in any specific way. A hospital can, for example, purchase a physician-administered drug at a large discount but sell it to Medicare or private insurers at full market price, keeping the price difference as a profit.” After inviting the hearing’s expert witnesses to propose solutions to “make 340B work better, put more safeguards in place, and pass along those savings to consumers,” Sen. Husted ended on a constructive note, saying, “I’m interested in solutions to this … and I think we’ve got some work to do in this committee to help.”
Employers and state and local governments are also impacted by 340B. The 340B program cost employers $235 million in Ohio and cost state and local employee health plans $40 million in 2023. Counterproductive legislation currently under consideration in Columbus that would further expand the number of contract pharmacies to which manufacturers must provide drug discounts would cost Ohio taxpayers an additional $8 million per year and cost private employers another $43 million.
As always, sunlight is the best disinfectant. Legislators from Columbus to Capitol Hill can shine a transparent light on the system by requiring covered entities to disclose how 340B savings benefit low‑income or uninsured patients.
Other reforms that Congress should consider include a clear definition of an eligible patient, providing better verification of patient eligibility when the prescription is filled, determining a relationship between the patient and the covered entity, and verifying that services were provided within the past 12 months.
