Rebates Won’t Solve America’s Rising Drug Cost Problem

In Washington, drug manufacturers are advocating to use rebates to undermine a critical program that supports health care for underserved communities.

The federal government is considering seismic changes to the 340B Drug Discount Program that would remove drugmakers’ responsibility to provide upfront discounts to safety net hospitals.

Instead, hospitals serving a high number of low-income patients, including those in rural and underserved communities, would be required to navigate a convoluted rebate system without the assurance they will ever receive support to care for their communities.

For drugmakers, rebates offer a strategic opportunity: Protect the price and make hospitals do the work to get the discount required by law. Adding an administrative maze of paperwork will limit the scope of the 340B program as drug prices go unchecked. It’s a strong first salvo to dismantle the program without addressing rising drug costs.

The 340B program requires drug manufacturers that participate in Medicaid to sell outpatient drugs at a discounted rate to eligible providers. Hospitals use the savings to provide services their communities depend on that would otherwise be at risk. The program operates at no cost to taxpayers and helps providers stretch their resources to serve vulnerable, low-income populations.

Drugs purchased through the 340B program represent just 7% of the U.S. drug market, and only 3% of their global revenues, but the savings translate into outsized benefits for Pennsylvania communities because it protects access to critical hospital services for patients in need. This includes children, cancer patients, those in rural areas, and others who live in regions with only one nearby hospital. Seventy-two Pennsylvania hospitals participate in 340B, and most of these facilities have negative margins. About half are rural and 49% provide labor and delivery services.

Removing 340B savings will force these hospitals to make difficult decisions about services, or worse, put them on the brink of closure. We need solutions that support access to care at a time when many facilities are already struggling to remain open.

I recently had the privilege of traveling with three rural hospital leaders to Washington, D.C. to talk with members of Congress about how the 340B program supports services they would otherwise struggle to maintain. Their stories underscore what’s at stake:

• Reopening a rural labor and delivery unit at a time when maternal health deserts are expanding.
• Ensuring a rural community can access cancer care close to home instead of traveling an hour or more.
• Keeping open a local emergency department that has meant the difference between life and death for neighbors who suffered farm accidents and heart attacks.

Those are just a few examples. Across Pennsylvania, hospitals are using the savings from the 340B program in ways that matter for patients and communities — from helping patients afford prescriptions to expanding behavioral health care and substance use treatment to creating new community outreach programs that address housing instability and food insecurity. Hospitals are investing in their communities through 340B.

The rebate proposal would create more administrative red tape that stands in the way of care, force hospitals to incur steep upfront costs, and add hurdles that will make it very hard for hospitals to ever realize the savings. This is not a sustainable proposal for safety net hospitals and clinics. These providers should be focused on advancing care instead of navigating requests for manufacturers to pay the discounts required by law.

We know where this is going. The proposed rebate program lacks safeguards to ensure drugmakers honor the discounts they are required to provide, and it opens the door for them to make other changes that diminish the program. We already are seeing these efforts in action, and we expect to see more in the coming weeks and months. Since the program was established in 1992, it has grown to reach more underserved communities receiving care in outpatient settings. Appropriately, the discounts also have grown with drug prices that have continued to climb over the years.

Everyone — hospitals, insurers, patients, employers, and the federal and state governments is experiencing health care cost increases. Hospital drug spending increased nearly 14% in 2025.

We are all partners to address rising costs. Forcing hospitals to float drug manufacturers millions with the hope of eventual repayment does not address the core issue. It’s a step backwards that puts care at risk.

For some Pennsylvania hospitals, 340B is the difference between a sustainable margin and being forced to make difficult cuts. Policymakers need to bring proposals that strengthen the program instead of putting its providers on the brink.

Instead of more paperwork and red tape, let’s focus on protecting a program that supports our communities’ health care.