California Can Show America How to Strengthen U.S. Drug Innovation

California has always been America’s proving ground for innovation. From Silicon Valley to San Diego’s biotechnology corridor, the Golden State has demonstrated that economic growth and scientific breakthroughs thrive when markets are transparent, incentives are aligned, and investments produce measurable results.

That same philosophy should guide reform of one of the nation’s fastest-growing—but least transparent—healthcare programs: the federal 340B Drug Pricing Program.

Created by Congress in 1992, 340B was designed to help hospitals and clinics serving vulnerable populations purchase medicines at discounted prices so they could stretch scarce resources and expand care for uninsured and low-income patients. That mission remains both noble and necessary.

The problem is that the program has evolved dramatically—to an estimated cost of $170 billion in 2025 alone, up from just $6.6 billion in 2010. Oversight has not kept up. Today, participating hospitals can purchase medicines at deep discounts while often receiving full reimbursement from insurers. Yet federal law generally does not require those discounts to be passed directly to patients or require comprehensive public reporting that demonstrates exactly how 340B revenues improve patient care.

Programs designed to serve the public should also be accountable to the public.

California is uniquely positioned to lead this conversation. The state is home to many of America’s premier research universities, biotechnology companies, pharmaceutical innovators, venture capital firms, and academic medical centers. Together, they form the backbone of an innovation ecosystem that develops the next generation of cancer treatments, gene therapies, Alzheimer’s medicines, and cures for rare diseases. That ecosystem is not just important to California—it is a strategic national asset.

That is why California policymakers should demand accountability and transparency around the 340B program in our state.

At a time when China and other global competitors are investing aggressively to dominate biotechnology and advanced medical research, the United States cannot afford policies that reduce confidence in the innovation ecosystem or obscure whether public programs are delivering the value Congress intended. Every dollar spent inefficiently within the healthcare system is a dollar unavailable for patient care, research, or future medical breakthroughs. 340B reform is, therefore, about far more than hospital accounting.

Greater transparency would allow policymakers to identify which providers are using discount revenues to expand access to care and which are simply generating additional institutional revenue without measurable patient benefits. Responsible hospitals would have the opportunity to demonstrate their success, while policymakers could target reforms that preserve the safety net without rewarding inefficiency. That benefits everyone.

Patients gain confidence that programs created on their behalf are actually serving them. Employers and workers’ unions benefit from a more efficient healthcare system that helps reduce upward pressure on premiums. Taxpayers receive greater accountability. Most importantly, America’s life sciences sector operates within a healthcare system that rewards value, promotes transparency, and supports continued investment in research and development.

For California, the stakes are especially high. The state has built one of the world’s most successful biomedical economies because it encourages innovation while demanding accountability. Those principles are not in conflict—they reinforce one another. Strong intellectual property protections, world-class research institutions, venture investment, and patient-centered health policies have made California a global leader in medical innovation. Reforming 340B to improve transparency follows that same tradition.

This is not an argument for eliminating the program. Genuine safety-net providers—including community health centers, rural hospitals, and facilities serving large numbers of uninsured patients—depend on 340B. Congress should preserve those benefits while modernizing the program for today’s healthcare marketplace.

That means requiring clear public reporting on how 340B revenues improve patient care, ensuring discounts benefit the patients Congress intended to help, strengthening oversight, and providing policymakers with the data needed to evaluate whether the program is achieving its statutory purpose.

California has often shown the rest of America what responsible leadership looks like. By championing transparency, accountability, and patient-focused reform, it can once again establish a model that other states—and eventually Congress—can follow.

America’s global competitiveness depends not only on inventing tomorrow’s cures but also on maintaining public confidence in the systems that support medical innovation. Reforming 340B is an opportunity to do both.

California should lead the way.