Minnesota’s 340B Hospitals Make One Billion More From 340B Than They Spend on Uncompensated Care

Minnesota’s 340B Hospitals Make One Billion More From 340B Than They Spend on Uncompensated Care

https://www.drugchannels.net/2026/04/minnesotas-340b-hospitals-make-one.html 

Minnesota’s new 340B data reveal a growing disconnect between the program’s size and the value Minnesotans receive in return.

In 2024, nonprofit hospitals generated more than $1.3 billion in 340B net profits—nearly a billion dollars more than they provided in uncompensated care. At the same time, these same institutions already benefit from substantial tax exemptions tied to their not-for-profit status and charitable mission.

The gap between 340B profits and charity care isn’t a rounding error or a one-off anomaly. The 340B Drug Pricing Program has evolved into a significant profit center for hospital systems. This is another layer on top of existing public subsidies, not a substitute for them.

As you’ll see below, our analysis describes a 340B program that generates financial gains far in excess of any contribution back to the people of the state. There is also no clear accountability for how those dollars are used.

A CLEARER PICTURE

The Minnesota Department of Health’s second 340B Covered Entity Report offers one of the most detailed financial snapshots of how 340B actually works.

The previous edition of the Minnesota report didn’t include 340B revenue from physician-administered drugs. The legislature added this as a requirement shortly after the first report was released, resulting in a more comprehensive analysis going forward. We reviewed the previous report here: Four Revelations from Minnesota’s First 340B Transparency Report.

Interested in other helpful resources on 340B?

• For a deep dive into the pharmacy and pharmacy benefit manager (PBM) aspects of 340B, see section 11.5. in our new 2026 Economic Report on U.S. Pharmacies and Pharmacy Benefit Managers.

• For information on how pharmaceutical wholesalers benefit from the 340B program, see Sections 3.4.4. and 5.3. of our 2025-26 Economic Report on Pharmaceutical Wholesalers and Specialty Distributors.

FOLLOW THE MONEY FOR THE REAL 340B STORY

The Minnesota report offers insights into how 340B revenue flows through the healthcare system. Below is DCI’s summary of the key financial data from the report. The information above each column explains our computations.

Key definitions for understanding the financial metrics:

• 340B revenue is the total money paid to the Covered Entity for 340B claims.

• 340B purchases is the money spent by the Covered Entity to acquire drugs at discounted 340B prices.

• 340B net profit is the reimbursement received by the Covered Entity minus the cost of the 340B drug and any operational costs to administer the program.

Reported 340B net profits more than doubled, from $630 million in 2023 to $1.34 billion in 2024. We estimate that this growth primarily reflects the inclusion of physician-administered drugs rather than organic program growth.

Three major conclusions stand out from these financial data and the report itself.

1. Hospital systems absorb (almost) everything.

If you’re looking for where the money goes, it starts—and mostly ends—with hospitals.

Hospitals in the state account for 93% of the state’s 340B purchases, which is slightly higher than the hospitals’ national share of 87%.

These same hospitals absorbed 98% of the 340B net profit in Minnesota. On average, 340B hospitals also charge more than non-340B hospitals for the same services, further supporting their margins.

The 2024 numbers paint a clear picture: 340B has evolved from a safety-net subsidy into a major profit stream for hospital systems.

Meanwhile federal grantees—the entities with explicit drug affordability mandates—account for only 7% of 340B purchases and 2% of 340B net profit in Minnesota. What’s more, almost half of federal grantees in Minnesota claim to lose money on 340B because their direct costs to run the program exceed 340B prescription revenue.

This is primarily a difference in the scale of federal grantees versus hospitals. A 340B program isn’t guaranteed to be profitable because there are fixed costs to set up the program, but the net profit with each additional 340B claim is higher relative to a non-340B claim.

One cautionary note: The report’s measure of operational costs “should be used with caution” due to inconsistent reporting by covered entities. The authors noted the costs were often implausibly high. This is an example of the important limitations to the data in this report. A recent Health Affairs article suggests that states set specific data reporting standards, validate self-reported internal cost data, ensure that data include all drugs with 340B pricing, and have sufficient resources to follow up on data issues.

2. Hospitals’ 340B profits are more than three times larger than their uncompensated care spending.

Nonprofit hospitals have fundamental legal and statutory community benefit obligations. That’s why Minnesota’s nonprofit hospitals received $373.5 million (2024) in tax exemptions tied to their nonprofit status ($213.5 million for sales and use taxes, plus another $160 million for property taxes). Fee-for service Medicare also includes uncompensated care adjustments on top of the base Medicare payment, which totaled another $5.9 billion in 2024 nationwide. Some states have a similar reimbursement mechanism under Medicaid as well, but Minnesota isn't one of them.

In return, Minnesota residents got $358.9 million in uncompensated care (2023—the most recent year available).

However, these same nonprofit hospitals also received an additional $1.31 billion in 340B net profits in 2024—nearly a billion dollars more than the uncompensated and charity care these hospitals offer. That’s on top of the tax benefits tied to their nonprofit status.

Covered entities have also been earning 340B contract pharmacy profits at the expense of state Medicaid programs. The 340B statute prohibits manufacturers from having to provide a discounted 340B price and a Medicaid drug rebate for the same claim.

For example, Indiana recently announced that it would discontinue Medicaid reimbursement for 340B claims. Here’s what the the Secretary of Indiana’s Family and Social Services Administration said about the 340B program: “We have no idea how those dollars are used at all.”

Any money generated from 340B discounts should not be double counted toward meeting nonprofit spending requirements. What’s more, Minnesota residents should be able to see what they are receiving in return for the substantial profits generated by 340B.

3. Plan sponsors fund most of the covered entities’ 340B profits.

Commercial and Medicare plans account for the majority (81%) of 340B revenue.

This aligns closely with our analysis from Follow the 340B Dollar: Senator Cassidy Exposes How CVS Health and Walgreens Profit as 340B Contract Pharmacies. Since 340B prescriptions at contract pharmacies cannot be identified at the time of adjudication, commercial plans and Medicare Part D are responsible for the balance of the profit earned by the 340B hospital and the contract pharmacy.

While manufacturers provide a discounted acquisition cost to covered entities that can contribute some of the 340B net profit, third-party payers fund the majority. As we explain in Follow the 340B Prescription Dollar: How PBMs Profit from 340B Contract Pharmacies, the spread results from payers reimbursing drugs at full negotiated rates that would otherwise be offset by rebates. Without the rebates, the total drug spending of the plan increases, typically leading to higher premiums for plans.

Unlike Medicaid, there are no statutory protections against 340B duplicate discounts for prescriptions paid by commercial third-party payers or Medicare Part D plans. However, manufacturers typically exclude 340B claims from qualifying for rebates, usually implemented through the PBM. The Minnesota report doesn’t discuss the volume or prevalence of duplicate discounts, but Minnesota appears to be better than most states at handling duplicate discounts.

The chart below illustrates 340B net profit by payer type and makes it clear that commercial and Medicare plans are funding the 340B program and hospitals are getting almost all the profit.

WE STILL DON’T KNOW WHERE THE MONEY GOES

The 340B Drug Pricing Program has grown into one of the largest drug programs in the U.S. The program is now larger than Medicaid’s net drug spending and represents nearly one-fifth of the gross-to-net discount for brand-name drugs. However, there remains limited transparency into how these revenues are used or which patients benefit.

Despite providing transparency into 340B revenue, the Minnesota report leaves a crucial question unanswered: How are hospitals using the money?

Neither federal law nor Minnesota rules require Covered Entities to report how they spend 340B profits. As a result, policymakers still cannot determine how much of hospitals’ 340B profits:

• Directly support charity care?

• Fund new hospital wings or acquisitions of other clinics?

• Offset operating losses?

• Duplicate funds being provided from non-profit tax exemptions?

• Are reducing needy patients’ out-of-pocket costs?

Consequently, the Minnesota report highlights a crucial question: If 340B is essential for supporting charity care, why is it generating multiples of nonprofit hospitals’ uncompensated care every year? It’s looking more like the 340B program is just subsidizing hospital margins.