Minnesota currently has 101 nonprofit hospitals, with 90 of them located in rural areas. These health care providers serve a largely low-income, uninsured or even noncitizen patients regardless of their ability to pay for the medical services provided.

Because of the importance of these health care providers in the public health infrastructure, Congress established a new public health program in 1992 — the 340B Drug Pricing Program — whereby drug manufacturers are “required to sell medicines to participating hospitals at steep discounts.”

Thirty-four years ago, the expectation was this congressional mandate of forcing pharmaceutical companies to sell drugs at a deeply discounted price would allow these hospitals to keep their doors open and pass savings along to their patients, especially those in need of “charity care.” No one thought back then to mandate how hospitals and clinics must spend the deep discounts they receive on prescription drugs.

Related: Letters to MinnPost: Reforming 340B Drug Pricing Program will help hospitals keep prescriptions affordable

As often happens, the good intentions of those who drafted the legislation has, over 30-plus years in practice, morphed into a very broken system that hardly provides the savings for patients that it was designed to help. Indeed, the program has morphed into a veritable ATM for hospitals, whereby they “pocket” the savings they make by purchasing deeply discounted drugs from manufacturers.

We learned Feb. 27 when the Minnesota Department of Health (MDH) released a new report just how much money these nonprofit hospitals are making off this program. According to the report, hospitals and clinics utilizing the 340B program billed government programs and insurance companies $3.04 billion despite only spending $1.34 billion on providing patients with the drugs through participating pharmacies. That means more than $1 billion worth of profit was made off the backs of the poorest Minnesotans.

Instead of passing along those substantial savings by providing more and deeply discounted care for poor rural and urban patients, many of the largest Minnesota hospitals brazenly used the program to accrue greater assets. Per the findings, from 2014-2022, Minnesota’s 340B hospitals saw assets increase by 48% with those profits. Some of these hospitals pocketed those profits all while aggressively hounding low-income patients for past due hospital bills. Indeed, Minnesota is one of only two states in the nation that allow city- or county-owned hospitals to seize state income tax refunds (among other methods) in efforts to satisfy past-due medical debt.

Sadly, this new report highlights what many feared: that there are stark inequities in how Minnesota hospitals, health care providers and ultimately patients benefit from the decades-old 340B program. Instead of helping poor, elderly or uninsured patients receive much-needed free or reduced-price health care and pharmaceutical drugs, the report lays bare the fact that large hospital systems and drug middlemen are pocketing gobs of profits that should have been better spent on providing charity care for poor patients.

Why does this matter? This new report shows that the 340B program continues to generate a whopping amount of profit for larger hospitals instead of providing savings for low-income consumers, which was the original intent of Congress in 1992. Yet before the 2025 report was released, some Minnesota policymakers wanted to allow for-profit pharmacies to continue making profits off a program meant to provide savings for low-income patients.

Minnesota was the first state that now requires an annual report on how the 340B program is working (or not) for poor and uninsured patients. The 2025 report shows, in shocking detail, just how broken the 340B system continues to be and cries out urgently for congressional reform. It matters to all Minnesotans because this program also drives higher costs for patients, taxpayers and employers, including nearly $158 million in higher employer health care spending in Minnesota.

Related: Enrollment in Minnesota’s Affordable Care Act marketplace is down 8%. At least.

Polling continues to show that a large swath of Minnesotans are worried about health care affordability. Recent reports show that 88% of those polled are concerned about hospital price markups on medicines. As MDH’s new report makes abundantly clear, those concerns are well-placed. It’s time to insist that Congress — not state lawmakers — revisit this law and support reform and greater transparency about 340B abuses. If it’s happening in Minnesota, it is likely happening everywhere.

Two years ago, the Minnesota Legislature paused for three years any new legislation regarding the 340B program. One reason for that pause was to allow policymakers to examine MDH reports on the 340B program. 

Yet last week, without hearing from MDH on the findings of the report released Feb. 27, a Senate committee passed legislation (S.F. 3769) that disregards the 2024 legislative “pause” and would short-circuit the Legislature’s intent to learn more about the law and discover what, if any changes, to make permanent. Legislators went back on their word and will likely create a bigger problem for Congress to ultimately sort out. This legislative bait-and-switch move will not help make prescription drugs more affordable for any Minnesotan.

Minnesota policymakers should resist the urge to make a bad situation worse. The 340B programs need congressional reform and improved transparency. Enacting strong reform in D.C. would likely help every Minnesota family and others across the country concerned about health care affordability. If lawmakers go back on their word, it will only cost Minnesota taxpayers more in increased litigation costs while further reducing trust in the legislative process — two unfortunate and unnecessary outcomes.

Annette Meeks is CEO of the Freedom Foundation of Minnesota, an independent, nonprofit educational and research organization dedicated to free-market principles and liberty-based public policy initiatives.

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