The 340B Drug Discount Program

Manufacturers are required to provide outpatient drugs at a discount to certain health centers, hospitals, and clinics.
People sitting around tables at a meeting in a conference room.

The Office of Pharmacy Affairs (OPA), as a part of HRSA, administers the 340B program and is responsible for oversight of various stakeholders, including covered entities, pharmaceutical companies, and the “prime vendor” federal contractor.

What's the Issue:
The 340B program is a federal program es­tablished in 1992 that allows safety-net health care organizations serving vulnerable popula­tions to buy outpatient prescription drugs at a discount. These organizations are known as “covered entities” and include certain health centers and hospitals, Ryan White HIV/AIDS Program grantees, and specialized clinics. Under this program, drug manufacturers are required to provide outpatient drugs at a dis­count to these organizations as a stipulation for their drugs to be covered under Medicaid.

Drugs included in the 340B program gener­ally consist of outpatient prescription drugs and drugs administered by physicians in an outpatient setting, excluding vaccines. Cov­ered entities generally save 25–50 percent on drug costs by participating in the program. Specific 340B prices are determined by statu­tory formulas based on manufacturers’ rates.

Government reports documenting deficien­cies in oversight and management of 340B have also brought attention to the program.

Hospitals in particular have been singled out by critics for their use of the program. The largest volume of 340B drugs originates in these settings, while various organizational issues, such as ownership, funding, and over­sight of hospitals, complicate the administra­tion of the program. This includes the fact that unlike other covered entities, hospitals treat both outpatients and inpatients.

What's Next:
HRSA was expected to release a comprehensive rule (known as the Mega-Reg) in the summer of 2014 to clarify eligibility and compliance within the program, including patient definition and hospital off-site facility eligibility. However, given the federal district court judge’s May ruling on orphan drugs, HRSA’s subsequent reinterpretation, and PhRMA’s new lawsuit, many in the industry have surmised that the timeline for issuing that rule has been pushed back.

Media Contacts

Sue Ducat

Health Affairs (301) 841-9962

Additional Media Contact: Melissa Blair

Robert Wood Johnson Foundation (609) 627-5937