The 340B drug pricing program was created by Congress in 1992 to help fill revenue gaps experienced by healthcare providers operating on very low, or negative, margins — by providing significant discounts on prescription drugs.

340B-eligibility can mean potentially millions of dollars in retail and specialty prescription reimbursements annually. Savings and revenue which, for some hospitals, literally make the difference between solvency and closure. Below is an overview of the program’s requirements.

What is a 340B Covered Entity?

The definition of “covered entities” includes six categories of hospitals:

  • Disproportionate share hospitals (DSHs)
  • Children’s hospitals and cancer hospitals exempt from the Medicare prospective payment system
  • Sole community hospitals
  • Rural referral centers
  • Critical access hospitals

What are the 340B eligibility requirements?

Hospitals in each of the categories must be (1) Owned or operated by state or local government, (2) A public or private non-profit corporation which is formally granted governmental powers by its state or local government, or (3) A private non-profit organization that has a contract with a state or local government to provide care to low-income individuals who do not qualify for Medicaid or Medicare.

What other clinics and health services are 340B eligible?

  • Federally qualified health centers (FQHCs)
  • FQHC “look-alikes”
  • State-operated AIDS drug assistance programs
  • The Ryan White Comprehensive AIDS Resources Emergency (CARE) Act clinics and programs
  • Tuberculosis clinics
  • Black lung clinics
  • Title X family planning clinics
  • Sexually transmitted disease clinics
  • Hemophilia treatment centers
  • Urban Indian clinics
  • Native Hawaiian health centers.

How do I register for 340B eligibility?

Facilities that meet the criteria of a “covered entity” can apply to participate in 340B by completing the online registration process during the first two weeks of any calendar quarter (January 1-15, April 1-15, July 1-15, October 1-15).

How do I know which drugs are eligible for discounted pricing?

The discounted prices are typically available through a covered entity’s wholesaler unless the manufacturer requires that its drugs be purchased through some other channel, such as a specialty distributor. At the same time, ProxsysRx maintains proprietary software tracking every prescription drug eligible for 340B reimbursement.

Which patients are covered under 340B?

Covered entities can dispense 340B-eligible prescriptions to individuals who (1) Have an established relationship with the covered entity, such that the entity maintains records of the individual’s care; (2) Receive care from a professional employed by the covered entity, or under contract or other arrangement (e.g., referral for consultation) with the covered entity, such that responsibility for the care remains with the covered entity; and (3) Receive health services from the covered entity that are consistent with the services for which grant funding has been provided to the entity.

Under the guidelines, an individual is not considered a patient of the covered entity if the only health care service received by the individual from the entity is the dispensing of a drug for subsequent self-administration or administration in the home setting.

What Are 340B Program Requirements?

Covered entities must meet the following ongoing requirements:

  • Keep 340B OPAIS information accurate and up to date.
  • Register new outpatient facilities and contract pharmacies as they are added.
  • Prevent diversion to ineligible patients1
  • Maintain auditable records documenting compliance with 340B Program requirements.2

It is also a covered entity’s responsibility to notify drug manufacturers and wholesalers that it will now purchase outpatient drugs at 340B prices. The wholesalers and manufacturers verify the covered entity’s enrollment on the 340B database, and must sell their drugs at or below the maximum price determined under the 340B statute.

Can my TPA apply for 340B discounts on my behalf?

Yes. However, the work performed by TPAs has emerged as a distinct risk to Covered Entities — due to disparate methodologies and capabilities across the industry. The problem is compounded for Covered Entities employing multiple TPAs to gain access to pharmacies utilized by their patient population.

NOTE: ProxsysRx is not a TPA. However, we hold acccountable all TPAs serving our clients — ensuring they maintain the same standards for 340B compliance that we do. To learn more about how ProxsysRx optimizes 340B savings and revenue, visit this page of our website.

How does the 340B program interact with the MDRP?

The Medicaid Drug Rebate Program interacts with other programs that receive manufacturer discounts on drugs. As a condition of participation in the Medicaid Drug Rebate program, manufacturers must also participate in the federal 340B program. The 340B program offers discounted drugs to certain safety net providers that serve vulnerable or underserved populations, including Medicaid beneficiaries.

340B ceiling prices are calculated to match Medicaid prices net of the rebate, but manufacturers can provide additional discounts to 340B providers that are not subject to the best price rule. Because the 340B program is administered separately, states and safety net providers must ensure that manufacturers do not pay duplicative discounts for Medicaid beneficiaries.

Safety net providers eligible for 340B discounts can choose whether or not they provide drugs purchased with the program discounts to Medicaid beneficiaries within state guidelines.

340B Best Practices for Covered Entities With Contract Pharmacies

In a contract pharmacy arrangement, the covered entity retains responsibility to prevent diversion and duplicate discounts, maintain auditable records, and meet all other 340B Drug Pricing Program (340B Program) requirements. Any covered entity that chooses to utilize a contract pharmacy must ensure that any such contract fully addresses these requirements.

Covered entities should maintain written procedures describing their processes for identifying 340B-eligible patients and meeting other 340B Program requirements at the contract pharmacy, as well as how non-compliance will be resolved.

Signing a contractual agreement with a third party does not exempt a covered entity from 340B program requirements or from retaining responsibility for that compliance.

To learn more about HRSA’s contract pharmacy requirements, please visit this page on the HRSA website.

Does HRSA Allow 340B Child Sites?

Yes. OPA requires that a covered entity register, as child sites, all offsite clinics, departments and services where 340B drugs are purchased or used, whether or not they are in the same building.

“Offsite” generally means a location has a separate physical address than the hospital parent site, and is not located within the main hospital. A hospital does not need to register outpatient clinics, departments or services located within the entity’s main hospital — but may do so if they appear on a reimbursable line of a hospital’s most recently filed cost report.

Applicable hospitals should ensure that their policies and procedures address qualification of 340B drugs dispensed at Child Sites for services not yet included in the most recently filed Medicare cost report, based on whether those locations meet Medicare provider-based requirements, whether the 340B covered entity maintains the responsibility and records of the patient’s care, and whether the health care professionals prescribing 340B drugs have relationship with the 340B covered entity.