Michigan may force hospitals to disclose savings from drug cost program

A drug discount program provides millions of dollars in savings to health providers each year — from Michigan’s big hospital chains to its small providers
Hospitals and other providers say they’re price-gouged by drugmakers, and the program helps them stay afloat
Drugmakers counter that providers are profiteering in the program, and in doing so, driving up health care costs

MUSKEGON — Against surging health care costs, some Michigan lawmakers want to force hospitals to disclose savings from a federal drug program intended to help the poor — but one that critics say brings big profits for some hospitals and large providers.

“We need to know where the dollars are going,” said state Rep. Curt VanderWall, R-Ludington, who chairs the House Health Policy Committee.

Hospitals argue that drugmakers are making it more difficult for them to get the discounts, while drugmakers counter that hospitals are “building a brand new wing” with the savings or otherwise diverting savings from patients, VanderWall said.

Nationally, providers spent more than $81B

The legislation, the lawmaker said, requires “transparency in a way that we can keep track and make sure (the savings) are actually going back into the patient, bringing down costs, and creating better access to care.”

VanderWall sponsored House Bill 4878, which would force hospitals each year to report how much they spent on 340B drugs, how much savings they received in return, and how they spent the money.

Related:

At issue are millions of dollars that flow into Michigan each year through the federal 340B program.

Created in 1992, it requires drug manufacturers to provide deep discounts on certain outpatient drugs purchased by certain health providers such as federally qualified health centers that serve large portions of uninsured and underinsured patients. Hospitals and other health care providers with higher-than-usual rates of low-income patients also qualify.

But in recent years — as the program has exploded in size — so, too, are the criticisms.

Just more than a quarter-century ago, 1,188 Michigan providers participated in 340B. Today, participating providers include nearly 4,000 Michigan hospitals, clinics, health departments and others, according to federal data.

Yet most patients likely never have heard of 340B, even when they benefit from it.

That’s because savings that were designed to keep drug costs low for providers rarely are passed onto patients, at least not directly.

Rather, the complex bureaucracy around 340B — according to the pharmaceutical industry — lacks guardrails, allowing it to boosts mega budgets of large health systems.

“In all my years being a patient, I’ve never been told I’m getting a 340B discount — that I am or I’m not. There’s no way to know, said Leslie Baldwin, of Holt.

In short, there’s no way to tell if her drugs are discounted in any way and, if they are, who benefits. Moreover, while 340B providers spent more than $81 billion on 340B drugs in 2024, according to the US Health Resources & Services Administration, there’s no way to tell how much each provider received in savings, said Bret Jackson, President and CEO of the Economic Alliance for Michigan and president of the National Alliance of Healthcare Purchaser Coalitions.

One report by the American Hospital Association puts those savings in 2022 — at least for US hospitals — at $46.5 billion.

Baldwin, who was diagnosed in 2009 with common variable immune deficiency, is one of the cofounders of Michigan Rare Coalition, which has advocated for more transparency in the 340B program. In fact, she said VanderWall’s legislation doesn’t go far enough for hundreds of thousands patients like her with rare diseases and very expensive drug needs.

Baldwin said she once called the billing department of one specialty pharmacy connected with a large Michigan hospital, “they had no idea what I was talking about.”

Savings “are supposed to be reducing costs for underinsured, non-insured and at-risk communities,” she said.

But what really happens with the dollars, she said, “nobody really knows.”

A portrait of a woman sitting at home. — Leslie Baldwin at home in Holt, MI, Monday April 6, 2026. Baldwin is the cofounder of the MI Rare Coalition, a group that helps people navigate rare medical conditions. (Rod Sanford for Bridge Michigan)

Ultimately, it’s the patients that lose out, said Lisa Grabert, a health economist and visiting health policy professor at Marquette University, who has been comparing the budgets of hospitals in the Midwest.

“If those discounts were passed down to the patient, their drugs would be a lot cheaper,” she said. “Unfortunately, those discounts are not getting down to the patient level, and they’re being used for other purposes.”

Grabert found that hospitals in Michigan that participate in the 340B program:

reported about 49% more revenue than similar hospitals that do not participate
invested 113% more into stocks and bonds compared to non-participating hospitals
Provide less charity care (about 0.47%) than non 340B hospitals (0.76%)
Did not significantly pay workers any better than non-340B hospitals

‘We need to know where the dollars are going,’ said State Rep. Curt Vanderwall, a Republican from Ludington, speaking about a federal drug program, 340B.

Vanderwall’s legislation would also require drugmakers to share with lawmakers information on drugs that cost more than $40 for a course of treatment and that had increased in price by more than 15% in a year.

“We have hospitals saying that the manufacturer is withholding payment,” VanderWall said. “We’ve got manufacturers that say hospitals are taking advantage of the system. What we need is true transparency.”

The information also would be shared with the state Department of Licensing and Regulatory Affairs. Violators could face a fine of up to $500 each day of the infraction.

The House bill follows similarly written Senate Bill 94, sponsored by Sen. Sam Singh, D-East Lansing.

No Michigan hospital has come under direct fire for its 340B spending, Singh notes. Transparency will clear the air, he said.

In fact, the 340B bill is tie-barred to Senate Bill 95, which calls for greater transparency in drug pricing, he noted. That means both bills would need to pass before being signed into law.

“It’s just one piece of a broader conversation” about affordability, he said.

Sustaining necessary care

Inside a pharmacy. — Savings on drugs distributed through the Hackley Community Care’s pharmacy in Muskegon help the center balance the budget and offer extra services, such as transportation for patients or maternal health care. (Kristen Norman for Bridge Michigan)

Grabert, the researcher, is quick to point out that her examination focused on hospitals, not smaller providers.

Such programs, she said, run on tiny profit margins or even losses at times, in large part because their patients are often uninsured. Moreover, they can’t tap into federal funds that hospitals may access.

At Hackley Community Care, in Muskegon, 340B “keeps our doors open. It’s that simple,” said CEO Mike Weessies.

Consider:

The 340B program meant $43,500 in savings at Hackley last year from prescriptions of Symbicort, an inhaler for people with asthma and chronic obstructive pulmonary disease, or COPD, Mike Sonuga, Hackley’s pharmacy director, said.

A medical professional takes a blood pressure reading from a seated patient — Medical assistants help the Hackley Community Care offices run efficiently and improve patient care, Hackley’s leaders say. But employing them relies on the savings from a controversial federal drug program known as 340B. (Kristen Norman for Bridge Michigan)

That money helped reduce the drug costs for about 30 patients who use Symbicort, he said.

But the savings that happen each week at this brightly lit pharmacy counter also help pay for transportation for patients who don’t have it.

In addition, Weessies said, the dollars helped pay for community health workers who connect patients to services outside the clinic, such as food pantries or counseling, and for medical assistants that keep the office running smoothly.

The savings also helped fund maternity care, a service considered a “loss leader” because it costs more to provide care than Hackley is reimbursed, as well as some of the $1.9 million in charity care for Hackley patients with no insurance.

“Legislators think that (the savings) go directly to the patient themselves, but the savings we receive goes to support operations. We don’t make enough money to support our patients without 340B,” Weessies said.

Like others, Sonuga, Hackley’s pharmacy director, accuses the drugmakers of making it increasingly difficult to tap into savings, shrinking the discounts, limiting options for pharmacy partnerships and stepping up — in Sonuga’s words — an “onslaught” of paperwork for each drug.

How does it work?

Hospitals, too, say 340B savings are a “critical lifeline,” especially rural facilities and those that serve a high number of low-income patients, according to the Michigan Health & Hospital Association. The program allows them “to stretch limited resources and care for patients.”

In southeast Michigan, Hillsdale Hospital buys Thrombin, an anti-clotting drug used primarily in surgery, for a mere 3 cents a vial — a dramatic discount from its normal price tag of $121.46. Purchased hundreds of times each month, that drug alone helped the hospital save $45,898 last year, according to information hospital leaders provided to Bridge.

Those savings were sifted into the hospital’s $92 million budget that, in turn, allowed the hospital to operate its obstetrics program that delivered 387 births, but operated at a $245,000 loss, according to hospital leaders.

Listen: The Michigan Health & Hospital Association explains 340B
Read: Here’s how Michigan Medicine uses 340B savings
Read: Here’s one researchers findings that hospitals fail patients with 340B savings

The program also protects hospitals against skyrocketing drug costs that hospitals must absorb, said Elizabeth Kutter, senior director, government and political affairs at the Michigan Health & Hospital Association.

“One of the biggest challenges that we face as an industry is the complexity around hospital financing,” she said. “Health care is wildly complex. Financing health care is wildly complex. The average person gets their bill or (insurance paperwork) and has a really hard time understanding what any of those things mean.”

Hospitals lock into years-long contracts with doctors and insurers, even as they must ride out annual increases in costs. Programs like 340B, federal funding to help cover uncompensated care, and facility fees help sustain the nation’s network of hospitals against the rising costs of labor, drugs, supplies and technology, said Brian Peters, CEO of the hospital association.

Meanwhile, hospitals stand to lose money on expensive, but critical, services, such as maternity care and burn units — “we have to make up the money somewhere,” he said.

It’s far from an ideal system, Peters said, but losing any of those programs could topple the budgetary “house of cards.”

(Editor’s note: The Michigan Health & Hospital Association is a sponsor of Bridge Michigan’s Health Watch newsletter. It had no role in the reporting, writing or editing of this article.)

Grabert, the researcher, and others also argue that discounts provided through 340B jack up drug prices elsewhere. While hospitals can hold onto the discounts for each drug they prescribe, they charge insurers the full rate. Insurers, in turn, ultimately pass on those costs onto other customers through cost-sharing, such as higher premiums or copays.

Other critics say the program drives consolidation, prompting larger providers — think large health systems — to snap up smaller practices and specialty pharmacies to rake in more discounts that can be applied across their entire patient population.

“The bigger the hospital, the more it can consolidate and grab more 340B sites,” said Jackson, at the Economic Alliance of Michigan.

Grabert suggests that hospitals must provide a minimum threshold of charity care to be eligible. And Jackson, at the economic alliance, suggests that only hospitals in poorer or underserved areas be eligible — not their dozens of sites that can be located in wealthier communities.

“It needs to be significantly reformed and focused on the areas that need it the most,” Jackson said.

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