President Donald Trump was swept into office last November with a promise to lower prices for Americans who had suffered under 40-year-high inflation under President Joe Biden. Why, then, are red states defying the president’s efforts to lower prices by passing laws that only feed growing health care costs?
Trump is delivering on his campaign promises. He began by going after the cost of fuel, which peaked at over $5 per gallon in June 2022. Today, the national average for a gallon of gas is $3.14. His administration also attacked sky-high egg prices, driven upward by the Biden team’s misguided response to avian flu. In May, the cost of eggs dropped 11% from the previous month. Inflation is at 2.35%, down considerably from a high of 8.3% in Biden’s second year in office.
But Trump is also going after drug prices, which have remained stubbornly high, despite efforts by both parties to lower them. He issued multiple executive orders, but provisions in his April 15 executive order “Lowering Drug Prices by Once Again Putting Americans First” are particularly meaningful.
One section includes a deliberate attempt to lower what Medicare pays for drugs—a savings for taxpayers and seniors whose copayments are based on the overall purchase price. In Trump’s first term, we tried to align Medicare reimbursement for these drugs with the discounted rates hospitals pay under the 340B program. While Trump’s effort was halted by the courts, Trump’s new executive order lays the groundwork for successful implementation by calling for a survey.
Medicare accounts for 30% of the U.S. retail drug market, and 340B hospitals are rewarded with discounts worth $66 billion. But they aren’t required to pass their savings on, and most of the time they don’t. Instead, they charge full price and pocket the difference. Successful implementation of the president’s plan could save Medicare up to $16 billion annually and mean lower copayments and less out-of-pocket expenditure for seniors.
And yet, several red states are pulling in the opposite direction, acquiescing to, if not outright championing, legislation that locks in and expands the 340B program.
This year, majority Republican legislatures have passed pro-340B bills in South Dakota, Tennessee, and Oklahoma. These bills were pushed by hospital associations eager to preserve the program’s opaqueness, allowing their members to profit handsomely by gaming it without any appreciable transparency measures governing their definition of who they call a patient. A reasonable person might wonder how someone filling prescriptions in Hawaii is a routine patient of an Ohio hospital.
Hospitals and clinics in 340B don’t disclose how much they make on the program or how they use the money, yet they claim without evidence that they will financially implode if the program is regulated in any way. The bills prevent—under threat of state-imposed monetary civil penalties—any attempt by a drugmaker to request data from the hospitals to whom it sells its discounted product. Since when do legislators who call themselves Republicans champion anti-transparency bills?
In addition to running counter to the Make America Healthy Again mandate for radical transparency, the bills support the expansion of the 340B program’s inflationary impact. Multiple studies have concluded that 340B raises the costs of health care because participating hospitals are incentivized to maximize profits by prescribing more drugs and the most expensive drugs. That’s why the average cost per prescription at a 340B hospital is 150% higher than at a non-340B hospital. Based on 2023 usage data, 340B increased health care costs for state and local governments by $1 billion.
Lawmakers in Tennessee and other states have scandalously failed to heed the fiscal notes that estimate the financial impact of these bills. Instead, they’ve chosen to reward large nonprofit hospitals at the expense of not only their state budget, but also every employer and citizen who pays higher prices for health care.
Big hospitals have come under scrutiny for lavishly spending 340B money on art displays and fancy architecture as well as woke initiatives like discriminatory DEI programs and climate activism—none of which contribute to patient care.
Lawmakers in those red states will have to explain to their constituents why they are pulling in the opposite direction of the president for whom they voted overwhelmingly. But in states like Ohio, Florida, and Wisconsin where similar bills have been introduced, Republicans must stand firm with the president and his efforts to bring transparency and lower costs to health care.
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