Overview of the 340B Drug Pricing Program

The 340B Drug Pricing Program was established in 1992 to provide qualifying patients with affordable prescription drugs. The program is available to several types of safety net health providers, and it allows these providers to stretch the limited federal resources available to them and to offer a comprehensive set of services.

Protecting the Public Interest

The 340B program was first enacted as a measure to regulate pharmaceutical prices for the public. In 1990, the Medicaid Drug Rebate Program was established, but market watchdogs soon observed that it had a significant yet unintended consequence. Under this program, the manufacturers of pharmaceutical drugs were forced to give the U.S. Department of Health and Human Services (HHS) rebates on medications to be used for state Medicaid programs. However, the rebates were based on the best prices of drugs in non-Medicaid markets. This caused drug companies to stop offering discounts or otherwise lowering the prices of their products for the public.

The 340B program was established two years later so that affordable medications could be made available to providers working with patients who are ineligible for Medicaid but have a need for low-cost healthcare. Under the 340B program, drug manufacturers taking part in the Medicaid Drug Rebate Program are obligated to provide a discount on drugs for patients who receive medical services from approved safety net healthcare providers. The discount for approved 340B providers is the same as that for state Medicaid providers.

Benefits of the 340B Program

According to research commissioned by the National Association of Community Health Centers (NACHC), qualifying providers can save from 15 to 60 percent on the costs of prescription drugs through the 340B program. The exact savings of each provider is dependent on the types of drugs and the amount of drugs prescribed to patients. In addition, providers may use the savings not only to offer reduced prices for low-income patients but to offer services to an expanded group of patients and to offer an expanded set of services.

An important benefit of the 340B program is the prime vendor program (PVP). The PVP is contractually managed by Apexus, and it offers three primary benefits:

  1. The PVP negotiates with drug companies on behalf of providers for sub-340B pricing.
  2. The PVP establishes efficient distribution networks to increase the availability of drugs.
  3. The PVP provides additional value-added services and products.

Although healthcare providers in the 340B program may use discounted drugs for all of their patients, they must comply with federal regulations, which state that patients with income over 200 percent of the federal poverty level must pay full price. The minimum price is reserved for patients with income under 100 percent of the poverty level.

The amount paid by providers for drugs under the program is based on the average manufacturer price (AMP) minus one or more discounts. The standard discount for generic drugs is 13 percent, and the discount for branded drugs is 23.1 percent. The AMP is recalculated every quarter to account for price changes and inflation.

Administration and Support

Administration of the 340B Drug Pricing Program is the duty of the Office of Pharmacy Affairs (OPA), which is a division of the Health Resources and Services Administration (HRSA). In addition to administering the program, OPA is charged with developing new models of pharmaceutical delivery, providing technical assistance to healthcare providers and consulting the federal government on pharmacy issues.

The American Pharmacists Association is contracted to assist OPA in administering the Pharmacy Services Support Center (PSSC). The primary services provided by PSSC are to help providers determine whether they are eligible for the 340B program and to help them apply if eligible. Once accepted, PSSC provides additional support to help providers use the program effectively.

One of the major drawbacks of the 340B program is that it is difficult to implement and navigate. Healthcare providers often have trouble getting into the program and working with it after having been accepted.

340B Program Eligibility

Although drug manufacturers taking part in the Medicaid Drug Rebate Program are required to provide 340B program discounts, the program is strictly voluntary. Providers must meet the eligibility requirements, and they must voluntarily apply for admission into the program. As of July 2010, 94 percent of eligible providers had enrolled in the program. Eligible providers include the following:

  • Federally qualified health centers
  • Family planning projects receiving federal grants
  • Health centers receiving grants under Title XXVI of the Public Health Service Act
  • Native American and Native Hawaiian health centers receiving federal funds
  • Disproportionate share hospitals
  • Children’s hospitals
  • Cancer and critical access hospitals
  • Rural referral centers and sole community hospitals

Once accepted into the program, it is up to each provider to notify drug manufacturers and distributors that it is participating. After acceptance is verified by the drug companies, discounted pricing must be made available immediately.