The History of 340B

Congress creates the Medicaid Drug Rebate Program (MDRP), requiring manufacturers to provide their “best price”  to Medicaid. This law led to many suppliers canceling the voluntary discounts that they previously offered to safety-net hospitals. 

In response to the price hikes felt in response to the MDRP, Congress enacted Section 340B of the Public Health Service Act, mandating manufacturers provide discounts to Covered Entities as a condition to having their medication covered by Medicaid and Medicare Part B.

HRSA issues guidance allowing Covered Entities without an in-house pharmacy to use a Contract Pharmacy to dispense their 340B drugs.

HRSA establishes the Prime Vendor Program to help Covered Entities negotiate pricing.

The ACA significantly expanded the 340B program by adding additional types of Covered Entities, including Critical Access Hospitals, Rural Referral Centers, and Sole Community Hospitals.

HRSA issues new guidance allowing Covered Entities to utilize an unlimited number of Contract Pharmacies, leading to a massive influx of program participation and complexities.

In 2019, a secure website detailing 340B ceiling prices is launched to help Covered Entities ensure they are not being overcharged. 

Suppliers begin pushing back against the widespread utilization of Contract Pharmacies, citing fears of program abuse. The push back has led to ongoing court cases, and proposed legislation or initiatives that would greatly impact the 340B program as we know it today.

In AHA v. Becerra, the Supreme Court unanimously ruled that HHS cannot significantly reduce Medicare reimbursement rates for 340B hospitals without first conducting a survey of hospital acquisition costs. This reversed years of deep cuts that began in 2018.

HRSA reported that 340B covered entities reached a record $43.9 billion in total drug purchases for 2021, a trend that continued to climb in subsequent years as the program expanded.

A federal district court ruled against HRSA’s narrow definition of a 340B-eligible “patient.” The court found that a prescription does not have to originate from a service provided by the Covered Entity for the drug to be 340B-eligible, provided the individual is a patient of the entity. This ruling significantly limits HRSA’s ability to enforce certain audit findings.

Following the 2022 Supreme Court win, CMS finalized a rule to repay 340B hospitals approximately $9 billion to compensate for unlawful reimbursement cuts between 2018 and 2022.