AB 1460: California’s Plan to Enrich Hospitals at Patients’ Expense

California lawmakers are about to hand hospitals and pharmacies a massive windfall and stick patients with the bill.

Assembly Bill 1460 by Assemblyman Chris Rogers (D-Santa Rosa), which passed out of the State Assembly in May, would expand the 340B Drug Pricing Program, a federal initiative that has become one of America’s most profitable healthcare schemes for hospitals and pharmacies.

Created to help vulnerable, low-income, and rural patients access discounted medications, the 340B program has ballooned into one of the most profitable government programs for hospital non-profits, pharmacy benefit managers and national pharmacy chains. Over the past decade, 340B drug purchases have exploded from $4 billion in 2010 to $66 billion in 2023.

Don’t let the do-gooder intention fool you. Hospitals purchase prescription drugs at federally-mandated discounts, then turn around and charge insured patients full retail rates. The difference goes straight to the hospital’s bottom line as unrestricted profit. No questions asked. No strings attached.

Meanwhile, the patients that this program was designed to help see little-to-no benefit. A Government Accountability Office study found 60% of participating hospitals don’t pass along the full discount to patients. Why would they? There’s no law requiring it.

The scheme has become so lucrative that hospitals now game the system like Vegas card counters. Non-profit hospital executives routinely earn million-dollar salaries and preside over a complex web of entities that avoid hundreds of millions of dollars in taxes. They gobble up physician practices and clinics not to improve care, but to expand their 340B eligibility.

Hospitals frequently establish contract pharmacies in wealthy suburbs not to serve the poor, but to maximize arbitrage opportunities on wealthy patients’ prescriptions. Data shows more than half of California’s 340B pharmacies supposedly helping low-income families are actually located in wealthy zip codes. Funny how that works.

An April 2025 U.S. Senate investigation exposed the scale of this scam: Two hospitals alone pocketed over $1 billion in 340B revenue over five years. ProPublica found 340B hospitals simultaneously suing thousands of low-income patients for unpaid bills while sitting on mountains of 340B cash that could fund charity care. One hospital sued over 8,300 patients, including those who qualified for financial assistance.

And California lawmakers want to make this grift even easier for hospitals in California.

AB 1460, which is set to be heard by the State Senate Health Committee on June 24th, would provide legal protections for these sweetheart deals. In California, providers maintain 4,377 separate 340B agreements primarily with large retail chains or pharmacy benefit managers.

AB 1460 includes zero patient protections, zero transparency requirements, and zero accountability measures. It’s a blank check for hospitals to expand their pharmacy empires into new markets while charging patients premium prices for discount drugs. The NAACP’s California chapter opposes the bill, with president Rick Callender writing it “will instead embolden these entities to keep cashing in at the expense of patients.”

“AB 1460 essentially gives large corporations, private health systems, and PBMs even more flexibility to profit off the backs of marginalized Californians,” warns Dr. Ifeoma Udoh of the Black Women’s Health Imperative.

The fix isn’t complicated. California should require hospitals to prove their 340B profits actually help poor patients through charity care, community clinics, or direct rebates to patients. Make them report where the money goes. Cap the markups they can charge. Ensure contract pharmacies actually serve safety-net populations.

The 340B program was supposed to be a safety net for America’s most vulnerable patients. Instead, it’s become a cash cow for America’s wealthiest “non-profit” hospitals.