Careful analysis of the seemingly intractable problem of rising medical costs can typically be reduced to three things: 1) who pays? (the accustomed answer generally being “someone else”); 2) the creeping role of the federal government in making that determination; and 3) the parasitic, and growing, impact of litigation. The back-and-forth over the 340B drug program buttons tight around each of these.
The basic problem of the gestating cost of healthcare is a classic economic one: There is too much demand for the available supply. Some of that demand is largely inelastic — if your heart or lungs malfunction or a piece of you is suddenly separated from its normal place on your body, you require medical care. But a considerable amount of the medical demand is more arbitrary, encouraged by the fact that in most cases someone else is picking up all or part of the tab — one’s insurance, one’s employer, or one’s neighbor via the altruistic machinations of Uncle Sam. Indeed, when we talk about “free” healthcare, what we mean is healthcare someone else pays for via taxation. In any case, the cost burden is falling on someone, and, invariably, that someone will seek out ways to shift that burden onto someone else.
Recommended Stories
This leads directly to the second issue: the advent of government taking on the role of arbiter. The 340B program, for instance, in which drug manufacturers are told by the government to sell their products to hospitals at a steep discount. The hospitals, in turn, are supposed to use those savings — the difference between what the medications cost and what they pay for them — to help provide care for people the government says they have to provide care for without charging. Price controls begetting price controls.
So, how has it all been going? Well, come to find out, government intervention in the marketplace has not worked out quite as neatly as envisioned by the central planners. A Government Accountability Office (what a despairing job that must be) investigation in 2018, for instance, found that 57% of the hospitals they looked at did not pass the drug savings — which can exceed 50% of the actual price — on to patients. A 2025 Senate HELP Committee investigation led by Sen. Bill Cassidy (R-LA) found that just two hospitals generated $276.5 million and $933.7 million, respectively, in just over three years, and yet neither passed discounts on to patients, nor could they even account for where the money went. Dr. John C. Goodman, president of the Goodman Institute for Public Policy Research, who has been contemplating all things healthcare policy for decades, testified a couple of years earlier in front of the Senate Committee on Homeland Security and Governmental Affairs about how the 340B program contributes to drug shortages. He described the program succinctly: “Effectively, there’s a financial transfer from drug companies to hospitals and clinics with little benefit to anyone else.”
Just for the sport of making it worse, enter the trial lawyers. Having grown bored with merely injecting malpractice lawsuits with multimillion-dollar payouts into the maelstrom of healthcare costs, they have now gleefully discovered the 340B goldmine. Three identical lawsuits were filed last May by a litigation firm representing three hospitals — University of Kansas Hospital Authority, University of Michigan Hospitals and Health Center, and Mount Sinai Health System — against CVS Health under the Racketeer Influenced and Corrupt Organizations Act, of all things, alleging diversion of 340B funds. Why RICO? Well, RICO affords the opportunity to be awarded treble damages, or three times actual damages. The University of Kansas and University of Michigan Hospitals are already seeking nuclear verdicts of $62 million and $66 million, respectively, and Mount Sinai is seeking a thermonuclear verdict of $121 million, adding up to around $249 million. With treble damages, that is $747 million — before attorney’s fees, of course. Not a bad payday.
REPUBLICANS MUST BACK TRUMP’S CRACKDOWN ON HOSPITAL ABUSE
The hospitals ought to know better, having often been the target of such legal malfeasance themselves. Medical malpractice verdicts of $10 million or more increased by some 67% from 2013 to 2023, with the average of the top 50 verdicts being $56 million in 2024. The cost of all this litigation, of course, is passed on to the patients. Mrs. Smith may have to pay more for her heart medication, but at least the attorneys are making a killing.
Much of the country’s healthcare woes, including issues with 340B, are of the federal government’s making and up to the federal government to solve. Instead of ordering Peter to subsidize Paul and then wondering why Peter gets creative about how to do so as painlessly as possible, Congress ought to reconsider the wisdom of meddling in the market in the first place. Meanwhile, it is reasonable to suggest the state’s come up with legislative remedies to ameliorate the impact of judicial extortion.
Kelly Sloan (@KVSloan25) is a Denver-based public affairs consultant and columnist.
