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Understanding the 340B Program: Eligibility, Implementation, and Discounts

Medication bottle from a 340b pharmacy
Photo by Anna Shvets

The 340B drug pricing program was established 30 years ago as a means to ensure access to affordable medication for low-income individuals and communities. This program, which is a part of a series of policies aimed at addressing healthcare disparities, continues to play a vital role in providing a safety net for those in need.

Community Health Centers is proud to participate in the 340B program, as it greatly assists in their mission to provide comprehensive, affordable healthcare to underserved communities. By taking advantage of the discounted drug prices offered through the 340B program, CHCs are able to stretch their limited resources and provide more comprehensive services to the low-income patients they serve, helping to ensure access to vital medication for those who need it most.

History of 340B

Prior to the implementation of 340B, Congress passed legislation to reduce payments for drugs under Medicaid. This law aimed to curb costs for the government-funded program and help control the rising cost of healthcare for taxpayers. However, it also had the unintended consequence of increasing costs for healthcare providers serving low-income patients. These providers, such as safety-net hospitals, health centers, and clinics, often serve communities with high concentrations of uninsured or underinsured individuals. Without reimbursement for the full cost of the drugs they provide, these providers faced financial strain and potentially even closure.

In response to this concern, Congress established 340B as a means to provide resources for these safety-net providers serving vulnerable communities. The 340B program allows these providers to purchase drugs at a discounted rate, which helps offset the costs of providing care for low-income patients. This ensures that these providers have the resources they need to continue to serve their communities and provide essential care to those in need. The 340B program is thus a crucial tool for ensuring a robust safety net for low-income and vulnerable populations.

Eligibility and Implementation

To participate in the 340B program, hospitals must demonstrate that they provide care for a significant percentage of patients with low incomes who are enrolled in Medicaid or Medicare or are located in rural areas. In addition, certain providers such as federally qualified health centers (FQHCs) and Ryan White HIV/AIDS clinics may also be eligible for 340B. These providers must recertify their eligibility each year with the Health Resources and Services Administration (HRSA), a public health agency within the Department of Health and Human Services (HHS) that administers the program.

Under 340B, manufacturers of covered outpatient drugs must enter into a pharmaceutical pricing agreement with the HHS Secretary. The manufacturer must agree to charge a price for these drugs that do not exceed an amount determined under the statute (known as the 340B ceiling price). In return, these companies gain access to the Medicaid and Medicare Part B drug markets.

Benefits, Discounts, and Penalties

The 340B discount for brand-name drugs is set as a percentage off of the drug’s average manufacturer price, and for generic drugs. If a manufacturer offers a lower “best price” for a drug, the discount can be larger.

  • Safety-net hospitals, health centers, and clinics serving low-income and vulnerable communities are eligible for the 340B program
  • Eligible providers can purchase drugs at a discounted rate, which helps offset the costs of providing care for low-income patients
  • The 340B program helps ensure that safety-net providers have the resources they need to continue serving their communities and providing essential care
  • The 340B program helps maintain a robust safety net for low-income and vulnerable populations
  • Allows eligible providers to expand services and stretch limited resources
  • Helps providers to reach more eligible patients and provide more comprehensive services.
  • Helps curb the cost of drugs and pharmaceuticals for both the providers and the patient.
  • 340B program helps to offer access to medication to the uninsured and underinsured population
  • 340B program also helps in reducing the burden of medical debt on low-income patients.

Additionally, Congress built in a penalty if a manufacturer chooses to increase the price of a covered drug by more than the rate of inflation. Each time a company hikes its price faster than inflation, the size of the discount increases. This inflation penalty serves as an important curb on manufacturer price increases.

340B Resources

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