The 340B Drug Pricing Program (340B) allows eligible hospitals and clinics to purchase outpatient drugs at deeply discounted prices. Established in 1992, 340B was intended to help a narrow set of safety-net providers improve access to medications for uninsured and indigent patients. The 340B program has since transformed into the second-largest federal drug program, with 340B purchases reaching $147.8 billion in 2024 at list price, up from $53.8 billion in 2018. While 340B clearly benefits hospitals, how those specific benefits are distributed to patients (if at all) is a matter of heated debate.
Two major structural dynamics have helped fuel 340B growth in recent years: Hospitals extending their reach through “child sites” and hospitals contracting with various off-site pharmacies to dispense medicines. New research, published in collaboration with Health Capital Group, examines how the proliferation of child sites and contract pharmacy relationships varies by hospital size and teaching status to identify which institutions are most actively driving, and benefiting from, the 340B boom.
Patterns of 340B expansion by hospital size and teaching status
The analysis finds that the structural expansion of the 340B Program between 2017 and 2023 has been dominated by large hospitals—particularly large teaching hospitals:
- Hospitals in the top quartile by bed size represented just 33% of all 340B participants, but they accounted for a staggering 81% of child site growth and 60% of contract pharmacy expansions.
- Among large hospitals, major teaching institutions accounted for 67.8% of child‑site growth and 54% of contract‑pharmacy growth, despite comprising about 40% of large participants.
- Compared with similarly sized non‑teaching hospitals, large major teaching hospitals averaged nearly twice as many child sites (49.6 vs. 25.4) and contract‑pharmacy relationships (93.8 vs. 51.4). The child‑site gap widened from 66% in 2017 to 95% in 2023.
Big hospitals’ capture of 340B growth drivers
These findings raise a critical question: Has 340B’s rapid growth been driven by patient need—or by the market power of large teaching hospitals with greater resources, staffing, and financial reserves? The Congressional Budget Office recently linked program growth to hospital integration with offsite clinics, expanded facility participation after the implementation of the Affordable Care Act, and a surge in contracts with off-site pharmacies. The Center’s analysis confirms that these trends are concentrated among large hospitals—and disproportionately among teaching institutions—that have captured the primary mechanisms of hospitals’ 340B expansion.
The concentration of growth among the largest systems does have consequences for the smaller safety-net providers 340B was intended to support. Research found hospital consolidation to be associated with 340B participation and higher hospital profits, which may contribute to fewer independent community providers and less competition. Small rural hospitals and community health centers—often operating on thin margins—may face a persistent disadvantage versus larger systems that can leverage superior data infrastructure, broader prescriber networks, patient capture and greater resources to maximize 340B capture.
What should policymakers do?
Discussions about 340B reform frequently highlight concerns raised by small safety-net hospitals regarding their access to discounted 340B pricing. However, the data indicates that most of the rapid 340B growth drawing policymakers’ scrutiny has been driven by large systems with substantial financial resources.
Prior studies found that the proliferation of child sites and contract pharmacies has been associated more with revenue‑seeking behavior than with expanding care for underserved communities, with little measurable improvement in spending on charity care, uncompensated care, overall community benefits or lower mortality in low-income residents. Together, these findings raise the question whether—without substantial reform—340B growth will continue to concentrate among the largest systems and may accelerate healthcare consolidation, leaving smaller institutions and community-based providers at a potential disadvantage.
With evidence that 340B contributes to higher public spending and cost‑shifting to employers and patients, strengthened oversight and accountability are critical to realign the program with its original mission of benefiting vulnerable patients.
This research was funded by Johnson & Johnson and conducted in collaboration with Dr. Neal Masia (Columbia University and Health Capital Group). For full details on the study design, methods and limitations, see: Masia, N., “Concentration of 340B Program Expansion Among Hospitals of Varying Size: A Retrospective Analysis, 2017–2023.” Health Capital Group. March 2026.
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