AHA Statement to House E&C Health Subcommittee on Lowering Health Care Costs for All Americans

Statement
of the
American Hospital Association
for the
Committee on Energy and Commerce
Health Subcommittee
of the
United States House of Representatives
“Lowering Health Care Costs for All Americans: An Examination 
of the Prescription Drug Supply Chain”

February 11, 2026

On behalf of our nearly 5,000 member hospitals, health systems and other health care organizations, as well our clinician partners — including more than 270,000 affiliated physicians, 2 million nurses and other caregivers — the American Hospital Association (AHA) appreciates the opportunity to provide the hospital field’s perspective on the impact that high and rising drug prices, as well as other drug supply chain inefficiencies, have on their ability to care for patients and communities nationwide.

For decades, the blue and white “H” symbol has been a beacon of healing, hope and health across the country. America’s hospitals and health systems take deep pride in the role they serve as the only source of constant, around-the-clock, high acuity care, and they remain unwavering in their commitment to delivering safe and quality care to every patient, in every community. Hospitals and health systems rely on a durable and efficient drug supply chain to achieve these goals and ensure patients have access to the medications they need. As one of the largest acquirers of pharmaceuticals in the country, hospitals and health systems are directly impacted by drug supply chain inefficiencies, including high prices.

Hospitals and health systems share the committee’s concern with the problems in the drug supply chain that have increased health care costs for Americans and threatened access to life-saving therapies. Hospitals and health systems have supported efforts that lower drug prices, bring needed transparency to the drug industry’s pricing decisions, and foster a durable drug supply chain.

The following statement highlights the concerns of hospitals and health systems, as well as potential solutions the committee could consider in its effort to bolster the drug supply chain and curb drug costs to promote stable access to more affordable health care for all Americans.

Drug Prices and Hospital Care

Drug prices in the U.S. are among the highest in the world and continue to grow at an unsustainable pace. The average launch price of a new drug in 2024 was $370,000, a 23% increase from the prior year,¹ and the prices for many drugs increase every year, often faster than inflation. A recent report highlights that in 2025, 688 drugs — many used to treat conditions like cancer, depression and asthma — experienced price increases above general inflation, with several drugs more than doubling in price.² More recently, a report found that nearly 900 drugs experienced drug price increases in just the first two weeks of 2026.³

Many of the drugs experiencing price increases or being introduced at high prices are primarily used by hospitals, significantly increasing hospitals’ costs to care for patients. Examples include Lenmeldy (used to treat pediatric metachromatic leukodystrophy) and Tecelra (used to treat synovial sarcoma), which cost $4.25 million and $727,000, respectively. In 2024 alone, hospitals and health systems spent approximately $144 billion to acquire drugs needed for patient care.⁴ This amounted to, on average, approximately 10% of a hospital’s annual budget.⁵ At the same time, hospitals are required to spend scarce resources to deal with instability and other problems in the drug supply chain. These include implementing workarounds to address drug shortages and other supply chain issues, adjusting purchasing in response to changing tariffs, and managing evolving drug manufacturer restrictions on accessing 340B discounts all add considerable staffing, technology and supplemental drug purchasing costs.

In addition, drug and pharmacy expenses are one of the most variable and hard to predict aspects of hospitals’ budgets. Despite being major purchasers, hospitals, like many other providers, are often “price-takers” with little ability to address drug costs.

This is evidenced by drug manufacturers’ frequent price increases that give hospitals little to no time to prepare. For example, Skyrizi, a drug commonly used in hospitals to treat immune-related inflammatory diseases such as Crohn’s disease and psoriatic arthritis, experienced a 5.7% price increase in January 2025 and again a 2.5% increase just six months later in July 2025.⁶

The challenges associated with high and rising drug prices are exacerbated because the demand for drugs is increasing dramatically. In addition to new drug therapies becoming available, drugs are more frequently able to take the place of surgery and other clinical interventions in patient care.⁷ For example, new chemotherapies are replacing cancer surgeries and glucagon-like peptide-1 (or GLP-1 drugs) have increasingly replaced the need for costly medical interventions to address obesity and obesity-related chronic conditions such as heart disease and diabetes. GLP-1 utilization has skyrocketed nearly 700% from 1 million prescriptions in 2019 to over 8 million in 2024.⁸ At the same time, prices for GLP-1 drugs have grown at about 4%-5% annually.⁹ The combination of increased demand and pricing for GLP-1s has resulted in a 500% spending increase.¹⁰

Drug Pricing and Policy Issues Impacting Patients and Providers

Below we highlight some of the most pressing drug pricing issues that are poised to impact patients and providers. We also provide recommendations to address these challenges.

1. The 340B Drug Pricing Program Helps Expand Access to Care for Patients and Communities

For more than 30 years, the 340B Drug Pricing Program has served as a critical tool to help eligible hospitals expand access to care and reduce overall health care costs for underserved patients and communities they serve. The program enables eligible hospitals to stretch limited federal resources by purchasing outpatient drugs at discounted prices, allowing them to reinvest savings directly into patient care and essential community services.

Importantly, 340B is not a federal spending program. It does not rely on taxpayer appropriations and does not increase federal health care expenditures. Instead, it operates by requiring pharmaceutical manufacturers that choose to participate in Medicaid to provide discounts to hospitals that care for a disproportionate share of low-income, uninsured, rural and medically complex patients.

Hospitals use 340B savings to increase access to care in ways that directly lower system-wide costs. These investments include providing free or reduced-cost medications for uninsured patients, maintaining outpatient oncology and specialty clinics, expanding mental health and substance use disorder services, funding medication management programs, and offering preventive services. By supporting early intervention, continuity of care, and medication adherence, 340B helps prevent avoidable hospitalizations and emergency department visits, outcomes that drive up costs for patients, payers and communities alike.

Despite claims to the contrary, the 340B program remains a relatively small component of the pharmaceutical market. In 2022, 340B discounts accounted for approximately 3% of global drug manufacturer revenues, even as hospitals participating in the program delivered nearly $100 billion in community benefits that year alone. Growth in the program has been driven not by misuse, but by broader health system trends, including rising drug prices, the increasing use of specialty medications and a shift from inpatient to outpatient care settings.

Weakening the 340B program would not reduce health care costs. Instead, it would force hospitals to scale back services, close clinics, and reduce access points. The impact on patients would be particularly acute in rural and underserved areas, leading to delayed care, higher uncompensated care and increased reliance on emergency services. These outcomes would ultimately increase costs across the health care system.

2. Access to Care Impacted by Unreliable Drug Supply Chains

Ensuring the reliability and resilience of the pharmaceutical and medical device supply chains is essential to sustaining high-quality patient care in every community across the nation. Each day in America’s hospitals, clinical teams depend on the uninterrupted availability of medications and devices to treat heart attacks, infections, cancer, organ failure, and countless other acute and chronic conditions.

Yet hospitals are increasingly forced to deliver care within a fragile and disruption-prone supply chain. Drug shortages remain widespread, with 253 drugs on the active shortage list as of the second quarter of 2025 — and nearly 60% of shortages now lasting more than two years, a sharp increase from 2019. These shortages disrupt patient care, delay critical treatments, and require hospitals to devote extensive staff time to crisis management rather than direct care.

A core driver of this fragility is the heavy reliance on international manufacturing for both pharmaceutical products and the raw materials required to make them. Hospitals routinely use imported cancer drugs, cardiovascular medications, immunosuppressants, antibiotics and combination therapies. The U.S. sources nearly 30% of its active pharmaceutical ingredients (APIs) from China, and over 90% of generic sterile injectable medications depend on APIs from either India or China. These high-risk dependencies leave patients vulnerable when natural disasters, geopolitical instability, manufacturing failures, or transportation breakdowns interrupt production. As hospitals across the country witnessed after Hurricane Helene, even domestic facilities are not immune: IV fluid shortages persisted for nearly a year due to storm-related damage to a major U.S. manufacturing plant.

Hospitals also are grappling with structural vulnerabilities within the supply chain itself. Many facilities depend on single-source suppliers for critical products. When a sole manufacturer encounters a quality problem, a contaminated raw ingredient, a sterilization bottleneck or a facility shutdown, hospitals often have no viable alternatives. Hospitals and health systems report that managing just three simultaneous drug shortages can require upwards of 100 person-hours, an unsustainable diversion of clinical and operational resources that should be focused on patient care. Market forces exacerbate these challenges: low reimbursement for generic sterile injectables leaves manufacturers without incentives to maintain redundant facilities, invest in quality improvements or diversify production locations. The result is a brittle market in which low-margin, high-need drugs are most at risk of disappearing from the supply chain and ultimately threatening the ability of hospitals to deliver the care their patients need.

3. Private-payer Policies Undermine Access and Patient Safety

For hospitals across the country, insurer-mandated white bagging and brown bagging policies are creating serious and avoidable risks for patients. These policies require hospitals to obtain clinician-administered drugs through insurer-selected specialty pharmacies rather than through their own hospital pharmacy systems. In white bagging, medications are shipped directly to the hospital on a one-off basis; in brown bagging, they are shipped directly to the patient, who must transport them to the hospital for administration. Both practices jeopardize the safety and reliability of lifesaving therapies.

White bagging and brown bagging policies do not address affordability of federal spending or reduce overall health care costs. Instead, they undermine hospitals’ established safety protocols and disrupt the timely care patients depend on. Hospitals cannot verify appropriate temperature control, handling, or integrity of medications shipped from external pharmacies. When clinical conditions change — particularly for cancer patients who often need real-time dose adjustments — externally sourced medications cannot meet clinical needs. This leads to canceled infusions, delayed treatment and worsened patient outcomes. These delays directly impact patients, especially those with cancer, chronic conditions and other serious illnesses requiring precise, reliable drug administration.

White bagging and brown bagging policies also significantly increase the operational and administrative burdens on hospitals. Hospitals must track shipments, manage discrepancies, coordinate with external pharmacies, and resolve insurer-driven delays. Brown bagging further worsens patient care and administrative burdens by making patients responsible for transporting sensitive medications — a practice that would never be accepted in any other high-risk clinical scenario. It also shifts responsibility away from trained clinicians, fragmenting care delivery and increasing the likelihood of harmful errors. The impact is especially acute in rural and underserved communities, where hospitals already operate with thin margins and limited workforce capacity.

Despite insurer claims that white and brown bagging improve efficiency, these are, in fact, insurer-mandated procurement policies that interfere with clinical decision-making, erode care coordination, and threaten patient safety across the health care system.

Recommended Solutions

We urge Congress to take the following steps to mitigate the impact of high drug prices and strengthen the U.S. drug supply chain.

1. Protect the 340B Drug Pricing Program

The 340B program is a proven, efficient and targeted tool that strengthens the health care safety net while helping to control downstream costs. Despite its proven track record, some drug manufacturers continue to undermine the program through unilateral efforts to drastically reduce the benefits that eligible hospitals, patients and communities receive from the program.

For example, contract pharmacy arrangements have long served as a critical extension of 340B hospitals, ensuring that vulnerable patients can conveniently access the outpatient drugs they need, whether through a local community pharmacy or mail-order services without traveling long distances to a hospital. This is especially vital for rural hospitals, many of which lack in-house pharmacies and rely almost entirely on contract pharmacy networks to dispense medications. Contract pharmacies also ensure access to specialty drugs that hospitals cannot keep in continuous inventory due to limited distribution. Despite contract pharmacies’ clear statutory grounding and longstanding support from the Health Resources and Services Administration, drug manufacturers have imposed unlawful restrictions that threaten hospitals’ ability to stretch scarce resources, resulting in millions in losses and reduced access to essential services. Protecting contract pharmacy arrangements is crucial to safeguarding patient access, controlling rising drug costs and maintaining a strong health care safety net.

Recently, some drug manufacturers have attempted to diminish the program by converting the way covered entities access discounted 340B pricing from an upfront discount to a back-end rebate. Under this model, hospitals must first purchase drugs at full price and then seek reimbursement from manufacturers after dispensing them. Hospitals would be required to submit claims data, wait for manufacturer validation and rely on post-purchase rebates to recover the discount. This approach violates longstanding federal policy, fundamentally changes how the program operates, jeopardizes patients’ access to drugs, and ultimately will add considerable burden and cost to the health care system.

340B hospitals need access to predictable upfront discounts. Many lack the cash reserves to pay the full cost of high-priced specialty drugs, which can delay treatment, limit drug availability, or force providers to stop offering certain therapies altogether. In addition, manufacturer-imposed conditions increase hospitals’ administrative burden and financing costs, increasing the likelihood of disputes and delays that directly affect patients’ ability to receive timely, life-saving medications.

We urge Congress to oppose efforts to move 340B pricing to a rebate model. More broadly, we ask Congress to protect the 340B program from efforts by drug companies to diminish its benefits to 340B hospitals and the patients and communities they serve.

2. Enact Policies that Promote Resilience Across Every Stage of the Drug Supply Chain

Hospitals and health systems believe that policies that expand domestic manufacturing capacity while also diversifying global sources of both finished pharmaceuticals and active pharmaceutical ingredients will strengthen the resilience of the drug supply chain. Moreover, policies that support increased domestic redundancy, such as requiring manufacturers to maintain reserves of essential drugs and encouraging geographically distributed production, will help prevent cascading shortages like those seen following Hurricane Helene. At the same time, enhancing transparency by requiring manufacturers to disclose production sites, sourcing locations for APIs and key starting materials, and early warnings about disruptions would give providers and regulators the information necessary to anticipate vulnerabilities and respond proactively.

Policies should align market incentives with quality and reliability to counteract structural weaknesses in the manufacturing of low-margin but high-need drugs. Federal purchasing and contracting frameworks can be strengthened by incorporating failure-to-supply provisions, supporting pull-incentives for essential generics, and encouraging investment in mature, high-quality manufacturing systems. Improved coordination across Department of Health and Human Services’ agencies — including the Food and Drug Administration, the Administration for Strategic Preparedness and Response and the Centers for Medicare & Medicaid Services — and the development of predictive analytics and strategic reserves are critical to addressing shortages that increasingly last years rather than months.

These reforms will help ensure hospitals and health systems have uninterrupted access to lifesaving medications and devices, reduce administrative burdens created by supply instability, and safeguard patient care nationwide.

3. Prohibit Harmful White-bagging and Brown-bagging Policies

It is critical for hospitals and health systems to retain the ability to procure and manage clinician-administered medications through their own accredited pharmacy systems. This ensures therapies move through established, rigorously monitored safety channels. Moreover, it ensures that drugs, many of which require special handling and storage, are safe for patients. Mandatory white and brown bagging policies instituted by private payers should be prohibited, especially for high-risk, infused or temperature-sensitive medications that require professional oversight.

White and brown bagging impose unnecessary logistical and administrative burdens on both hospitals and patients. Moreover, they carry unnecessary risks that undermine the very purpose of these medications, which is to improve the health and well-being of patients. We urge Congress to prohibit brown bagging for clinician-administered therapies and hold insurers accountable for operational failures that disrupt patient care. Protecting hospital-centered coordination is essential to preserving safety, reducing waste and maintaining continuous access to specialty medications.

Conclusion

Thank you for your commitment to addressing issues on drug prices and the drug supply chain to reduce health care costs for Americans. We look forward to working with you to support and advance these critical issues.

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¹ https://www.reuters.com/business/healthcare-pharmaceuticals/prices-new-us-drugs-doubled-4-years-focus-rare-disease-grows-2025-05-22/ 
² https://www.sanders.senate.gov/wp-content/uploads/9.29.25-HELP-Minority-Report-Trump-Drug-Price-Increases.pdf 
³ https://www.pharmexec.com/view/companies-raise-list-prices-16-agreements-lower-prices-trump-administration-report#:~:text=Key%20Takeaways,Stock.Adobe.com 
⁴ https://www.aha.org/system/files/media/file/2025/04/The-Cost-of-Caring-April-2025.pdf 
⁵ Ibid. 
⁶ https://www.46brooklyn.com/branddrug-boxscore 
⁷ https://www.hfma.org/cost-effectiveness-of-health/how-specialty-drugs-are-remaking-healthcare-and-driving-up-costs/ 
⁸ https://www.kff.org/medicaid/medicaid-coverage-of-and-spending-on-glp-1s/#:~:text=Overall%2C%20the%20number%20of%20GLP,from%201%25%20in%202019 
⁹ https://www.csrxp.org/dose-of-reality-big-pharmas-glp-1-price-gouging-unsustainable-for-american-patients-and-the-u-s-health-system/#:~:text=Big%20Pharma%20Already%20Hiking%20Prices,in%202023%20by%20five%20percent 
¹⁰ https://jamanetwork.com/journals/jamanetworkopen/fullarticle/2832114