5 Fast Facts: Why Pennsylvania’s Hospitals Need the 340B Drug Pricing Program

September 16, 2025

BY: Cameron Brown, HAP policy analyst

The 340B Drug Pricing Program is a federal program that allows health care organizations to purchase outpatient drugs at reduced prices, allowing providers to reach more patients more affordably. Under 340B, drug manufacturers must enter into a pricing agreement with the Health and Human Services secretary to participate in the program, which ensures that their drugs are covered by Medicaid.

340B has been a lifeline for hospitals, especially in rural and underserved communities. Here are five fast facts about the 340B program that explain why Pennsylvania hospitals are stepping up to protect the program:

1. Many rural and critical access hospitals rely on 340B

The 340B program supports 72 hospitals across 30 counties in Pennsylvania, serving vulnerable populations in both urban and rural areas. What’s critical: nearly half of these hospitals are in rural areas, where health care resources are already limited. Many of these hospitals, including 15 that offer critical labor and delivery services, depend on 340B savings to stay financially viable.

About 80 percent of Pennsylvania’s critical access hospitals participate in 340B. These hospitals, which serve populations that often face long travel distances for care, rely on the program’s drug discounts to continue providing essential services. Without 340B, many of these hospitals would struggle to maintain access to care in these rural communities.

2. 340B saves money for hospitals that are financially vulnerable

While the 340B program helps hospitals stretch their limited budgets, 53 percent of Pennsylvania’s 340B hospitals still operate with a negative margin. In these financially vulnerable institutions, the savings from the program are crucial for offsetting the high cost of care and ensuring their continued operation.

These savings make it possible for hospitals to maintain essential services, even in the face of rising costs and inadequate reimbursement rates. The drugs purchased under the 340B program account for just 7 percent of the total U.S. drug market, but the savings help hospitals avoid cutting services, particularly in high-need areas like obstetrics, diabetes education, and oncology.

3. Savings from 340B create funding for critical community programs

Beyond providing discounted medications, 340B savings are reinvested in key programs that benefit low-income and older patients in Pennsylvania. Some of these include:

• Free or reduced-price prescription drugs for patients who can’t afford medications.
• Clinical pharmacy services like disease management and medication therapy management programs that help patients manage chronic conditions.
• Expansion of outpatient clinics to improve access to care in underserved areas.
• Community outreach programs such as vaccination drives and educational initiatives aimed at improving public health.
• Oncology and obstetrics services, which are particularly vital in rural communities.

Without these critical programs, patients in rural and underserved areas would face increased barriers to care, potentially leading to worse health outcomes and higher overall health care costs.

4. CMS’ proposed rebate model puts significant burden on hospitals

The transition to a claims-based rebate model is a major concern for 340B hospitals. This proposed model would significantly alter how hospitals receive the drug discounts they rely on. It introduces complexities like new IT systems and staff training, which will take time and financial resources to implement.

Hospitals would have to manage upfront drug costs at the Wholesale Acquisition Cost, a price point that many can’t afford without the rebate savings coming through immediately. Hospitals fear the proposed pilot could lead to millions of dollars in financial losses in the first few months, which would force them to cut back on vital services or even close their doors.

With the current guidance offering only 60 days’ notice before manufacturers implement the changes, hospitals would face an impractical and potentially catastrophic timeline to adjust their operations. Without sufficient time to prepare, many hospitals may lose access to rebates, further threatening their ability to provide care.

5. Protecting 340B means protecting patients and their communities

Studies are clear: the loss of 340B discounts could affect hospitals' ability to absorb the costs of high-cost medications, which would most directly impact low-income and older patients—the very individuals the 340B program was designed to protect.

CMS’ proposed changes to the 340B program could lead to significant disruptions in patient care. Hospitals are already operating under financial strain, and further erosion of 340B could force them to cut back on essential services or increase costs for patients.

The bottom line: the 340B program is an integral part of Pennsylvania’s health care system, particularly for our rural and critical access hospitals. The program’s savings help hospitals keep their doors open, fund critical patient services, and ensure that those most in need of care can still access it. HAP is advocating to protect the integrity of the 340B program and ensure that any changes to the program support our hospitals and the patients and communities they serve.

For more information, please visit our Resource Center or review HAP’s recent comment letter, which highlights how moving forward with CMS’ proposed rebate model without proper safeguards would jeopardize patient access to critical medications and services.