Stay Informed with Our 340B FAQ & 340B
Frequently Asked Questions:
The 340B Program is a federal initiative that requires drug manufacturers to provide outpatient drugs to eligible healthcare organizations at significantly reduced prices. It is designed to help safety-net providers stretch federal resources to reach extend health care coverage to low-income and uninsured patients.
The 340B Program is a federal initiative that requires drug manufacturers to provide outpatient drugs to eligible healthcare organizations at significantly reduced prices. It is designed to help safety-net providers stretch federal resources to reach extend health care coverage to low-income and uninsured patients.
HRSA (Health Resources and Services Administration): The federal agency overseeing the program.
Covered Entities: Eligible hospitals and clinics purchasing the discounted drugs.
Manufacturers: Pharmaceutical companies providing the discounts.
Contract Pharmacies: Retail partners that dispense medications for covered entities.
Patients: Individuals receiving care through these providers.
To participate, an organization must be a Covered Entity, which includes:
Federal Grantees: Clinics receiving specific federal grants.
Eligible Hospitals: Public or private non-profit hospitals that serve a high volume of low-income patients.
To be eligible for 340B pricing, a patient must meet three criteria:
Established Relationship: The patient must have an established healthcare relationship with the 340B “covered entity” (hospital or clinic), where the entity maintains their medical records.
Provider Oversight: The patient must receive care from a professional who is either employed by the entity or provides care under a formal referral or contract.
Covered Service: The healthcare service provided must be consistent with the services for which the entity’s 340B status was granted (e.g., a specialty clinic’s patient must receive that specialty’s care)
Both programs provide drug discounts; however, they function differently:
340B Program: Provides a procedural discount at the time of purchase. The healthcare provider (covered entity) buys the drug at a lower price directly from the manufacturer or wholesaler.
Medicaid: Provides a retrospective rebate. The state Medicaid agency pays for the drug at regular price and then requests a rebate back from the manufacturer later.
Congress: Establishes the core eligibility categories through federal law (Section 340B of the Public Health Service Act).
HRSA (Health Resources and Services Administration): The federal agency that administers the program, sets specific participation criteria, and oversees the registration and audit processes.
Yes. The Drug Supply Chain Security Act (DSCSA) requires unit-level “track and trace” for all prescriptions.
For 340B, this means covered entities and contract pharmacies must coordinate electronic data to match the physical flow of discounted drugs.
Since 1992, the program has grown into the second-largest federal drug program.
Key changes include the 2010 Affordable Care Act expanding eligible hospital types and the 2010 guidance allowing entities to partner with an unlimited number of contract pharmacies.
Cost Savings: Covered entities save 25% to 50% on outpatient drug purchases.
Expanded Care: Savings are reinvested into “wrap-around” services like mental health, translation, and mobile clinics.
Patient Access: Allows providers to offer free or low-cost medications to uninsured and low-income patients.
Stability: Provides critical revenue that helps safety-net and rural hospitals remain operational.
Yes. While 340B is a federal program, states have increasingly enacted their own laws to regulate how it operates within their borders. Common state-level requirements include:
Transparency Reporting: States like Minnesota and Colorado require entities to report exactly how much they save through 340B and how those funds are spent on community care.
Contract Pharmacy Protections: Many states have passed laws prohibiting drug manufacturers from restricting an entity’s use of external contract pharmacies.
PBM Regulations: Some states bar Pharmacy Benefit Managers (PBMs) from “discriminatory contracting,” such as offering lower reimbursement rates to 340B pharmacies than to non-340B pharmacies.
Medicaid Billing Rules: States often mandate specific billing identifiers to ensure 340B drugs aren’t also subjected to state Medicaid rebates.
Contract Pharmacy Restrictions: Many manufacturers have limited the number of outside pharmacies entities can use, leading to intense legal battles.
Duplicate Discount Prevention: Ensuring a drug doesn’t receive both a 340B discount and a Medicaid rebate remains a complex data-tracking challenge.
Proposed Rebate Models: A shift from upfront discounts to “pay-first, rebate-later” models is being debated, which could strain hospital cash flows.
Transparency Pressures: Legislators are increasingly calling for more granular reporting on how entities spend their 340B savings.
Medicare Price Negotiation: New government-negotiated prices for top drugs may create administrative conflicts with existing 340B discount structures.
Industry Terms and Acronyms:
First introduced in 1992, 340B is a federal program that requires drug manufacturers to provide outpatient medications to eligible healthcare organizations at significantly reduced prices. It allows these providers to stretch scarce federal resources to reach more eligible patients.
A healthcare provider or facility, such as a hospital or specialized clinic, that meets specific federal criteria to participate in the 340B program. These entities serve a high volume of low-income or uninsured patients.
An external retail pharmacy that enters into a formal agreement with a Covered Entity to dispense 340B-priced drugs to the entity’s patients. This allows patients to pick up discounted medications at convenient local locations.
PBM (Pharmacy Benefit Manager) is a third-party administrator that acts as intermediaries between health plans, drug manufacturers, and pharmacies.
They manage prescription drug benefits, negotiate rebates from manufacturers, and develop “formularies” (lists of covered drugs) for insurance plans.
HRSA (Health Resources and Services Administration) is the federal agency within the U.S. Department of Health and Human Services (HHS) responsible for overseeing the 340B Program.
HRSA manages the registration of participants, ensures program compliance, and conducts audits of both manufacturers and providers.
ADM (Alternative Distribution Model) is a specialized logistics strategy where a Covered Entity purchases and takes physical possession of 340B drugs before transferring them to contract pharmacies.
This model is often used to maintain access to 340B pricing in response to manufacturer restrictions on direct shipping to pharmacies.
A common billing arrangement where a Covered Entity purchases and pays for 340B drugs (the “Bill-To”) but directs the manufacturer or wholesaler to deliver the products directly to a Contract Pharmacy (the “Ship-To”).
The entity retains legal title to the drugs while the pharmacy handles storage and dispensing.
A joint federal and state program that provides health coverage to low-income individuals. In the 340B context, it is a primary payer source.
To participate in Medicaid, drug manufacturers must also agree to provide 340B discounts, but they are legally protected from providing both a 340B discount and a Medicaid rebate on the same drug (“duplicate discount”).