Opinion: Michigan employers would suffer under uncontrolled growth of drug-purchase program
Bret Jackson, CEO, Michigan Healthcare Purchaser Coalition
Crain’s Detroit Business, April 21, 2026
Michigan businesses, from Grand Rapids to Detroit, are feeling the impacts of rising health insurance costs – impacting economic development, reducing wages, and limiting job growth. But state legislators are proposing changes to a federal drug discount program that would make it even harder for businesses, unions, working families, and patients in Michigan to afford healthcare.
The 340B Drug Pricing Program was created to allow “safety net” hospitals to purchase steeply discounted medications from pharmaceutical companies to provide care for low-income, uninsured, and underinsured patients. However, hospitals are not required to pass these discounts on to needy patients nor are they required to disclose how much they profit from 340B discounts or how they use those profits. This has led to a situation in which large, tax-exempt hospitals are able to leverage 340B as a profit driver by marking up discounted medications and pocketing the difference.
Since 2010, 340B purchases have grown more than 12x to $81 billion, as it has morphed from a safety net program into a profit driver for large, tax-exempt hospital systems that can mark up discounted medications and pocket the difference.
Research from Lisa Grabert, Visiting Professor of Research at Marquette University, shows that Michigan 340B hospitals generate than non-340B peers. Despite higher revenues, costs continue to rise for purchasers. The National Alliance of Healthcare Purchasers Coalition estimates that higher prices on 340B drugs translate into $36 billion in increased healthcare costs for employers annually.
Because of this “buy low, sell high” model, 340B materially increases employer-sponsored premiums, and increases overall healthcare system costs across the country. Legislation under consideration in Michigan would further limit transparency and accountability in 340B, which would benefit large hospital systems and increase healthcare costs for patients already struggling.
Markups on 340B drugs, which can average around one-and-a-half times the purchase price, result in Michigan’s state health insurance plans – including those for state government employees, local government employees, and public educators – paying more than $152 million in overcharges.
These increased charges result in higher out-of-pocket costs for thousands of working Michigan families when a drug is purchased through 340B. They also directly contribute to higher insurance premiums, and rising healthcare costs constrain employers’ ability to invest in wages, benefits, and workforce growth.
And employers struggle to see how 340B dollars are earned or spent. Even in states where legislation has been passed that requires reporting on 340B, there are still gaps in understanding its scale and where the money goes. For example, the 2025 Minnesota 340B covered entity report found that the state’s largest hospitals generated the vast majority of state 340B profits, despite representing only 1% of all 340B-eligible sites in the state.
These findings are not isolated to Minnesota. Our research shows that urban hospitals in Michigan have higher operating profit margins – around 20%, compared to just 13% for rural hospitals. It also shows that large hospital systems, like University of Michigan and Corewell, have significantly higher profit margins than smaller or rural hospitals, which is driven in part by the massive 340B profits that large systems generate. These trends illustrate the increasing dominance of large hospital systems across our state, putting independent providers and community-based practices at a competitive disadvantage – including through rising 340B profits at these larger systems.
The Michigan Legislature should reject HB 4878 and SB 94, which would lock in a lack of transparency in the 340B program and foreclose the opportunity to make it a more effective and accountable program. Legislators should focus on reforms that help working families, employers, and unions better afford healthcare by encouraging greater transparency to ensure that 340B profits are being used to benefit patients.