340B FAQs

What is the 340B Drug Pricing Program?

The 340B Drug Pricing Program is a federal program that requires drug manufacturers participating in the Medicaid drug rebate program to provide outpatient drugs to enrolled “covered entities” at or below the statutorily-defined ceiling price. This requirement is described in Section 340B of the Public Health Service Act and codified at 42 USC 256b. The purpose of the 340B Program is to permit covered entities “to stretch scarce Federal resources as far as possible, reaching more eligible patients and providing more comprehensive services.” H.R. Rep. No. 102-384(II), at 12 (1992).

Which programs are eligible to participate in the 340B program?

1. Federally-qualified health center (as defined in section 1905(l) (2) (B) of the SSA). This category includes:
   1. FQHC Look-alikes Consolidated Health Centers (Sec.330(e) PHSA)
   2. Migrant Health Centers (Sec.330 (g) PHSA)
   3. Health Care for the Homeless (Sec.330(h) PHSA)
   4. Healthy Schools/Healthy Communities
   5. Health Centers for Residents of Public Housing (Sec. 330(i) PHSA)
   6. Office of Tribal Programs or urban Indian organizations (P.L. 93-638 and 25 USCS §1651)
2. A family planning project receiving a grant or contract under Sec. 1001 PHSA (42 USCS§3001).
3. An entity receiving a grant under subpart II of part C of Title XXVI of the Ryan White CARE Act (RWCA) (relating to categorical grants for outpatient early intervention services for HIV disease) – Early HIV Intervention Services Categorical Grants (Title III of the RWCA).
4. A State-operated AIDS Drug Assistance Program (ADAP) receiving financial assistance under the RWCA.
5. A black lung clinic receiving funds under Section 427(a) of the Black Lung Benefits Act (30 USCS§901).
6. A comprehensive hemophilia diagnostic treatment center receiving a grant under section 501(a)(2) of the SSA.
7. A Native Hawaiian Health Center receiving funds under the Native Hawaiian Health Care Act of 1988 (42 USCS§11701).
8. An urban Indian organization receiving funds under title V of the Indian Health Care Improvement Act (25 USCS§1601).
9. Any entity receiving assistance under title XXVI of the SSA (other than a State or unit of local government or an entity described in subparagraph (D)), but only if the entity is certified by the Secretary.
10. An entity receiving funds under section 318 (42 USCS §247c) (relating to treatment of sexually transmitted diseases) or section 317(j)(2) (42 USCS§247b(j)(2)) (relating to treatment of tuberculosis) through a State or unit of local government, but only if the entity is certified by the Secretary.
11. A disproportionate share hospital (as defined in section 1886(d)(1)(B)) of the SSA –
    1. is owned or operated by a unit of State or local government, is a public or private non-profit corporation which is formally granted governmental powers by a unit of State or local government, or is a private non-profit hospital which has a contract with a State or local government to provide health care services to low income individuals who are not entitled to benefits under title XVIII of the Social Security Act or eligible for assistance under the State plan under this title;
    2. for the most recent cost reporting period that ended before the calendar quarter involved had a disproportionate share adjustment percentage (as determined under section 1886(d)(5)(F) of the Social Security Act) greater than 11.75 percent or was described in section 1886(d)(5)(F)(i)(II) of such Act; and
    3. does not obtain covered outpatient drugs through a group purchasing organization or other group purchasing arrangement

The Affordable Care Act amended to the definition of covered entity in the 340B statute to also include:

1. A children’s hospital excluded from the Medicare prospective payment system pursuant to section 1886(d)(1)(B)(iii) of the Social Security Act, or a free-standing cancer hospital excluded from the Medicare prospective payment system pursuant to section 1886(d)(1)(B)(v) of the Social Security Act, that would meet the requirements of hospitals described in 11 above, including the disproportionate share adjustment percentage requirement under clause (ii) of such subparagraph, if the hospital were a subsection (d) hospital as defined by section 1886(d)(1)(B) of the Social Security Act.
2. An entity that is a critical access hospital (as determined under section 1820(c)(2) of the Social Security Act), and that meets the requirements of subparagraph (L)(i).
3. An entity that is a rural referral center, as defined by section 1886(d)(5)(C)(i) of the Social Security Act, or a sole community hospital, as defined by section 1886(d)(5)(C)(iii) of such Act, and that both meets the requirements of subparagraph (L)(i) and has a disproportionate share adjustment percentage equal to or greater than 8 percent.

Which patients are eligible? Do they have to be below a certain income?

There is no means test or income limit regarding patient eligibility. Any patient of a participating 340B entity is considered a 340B eligible patient, regardless of payer status, provided that the patient definition criteria are met: An individual is a patient of a covered entity (with the exception of individuals registered in a State-operated or funded AIDS Drug Assistance Programs) only if all of the following criteria are met:

1. The covered entity has established a relationship with the individual, such that the covered entity maintains records of the individual’s health care; and
2. The individual receives health care services from a health care professional who is either employed by the covered entity or provides health care under contractual or other arrangements (e.g. referral for consultation) such that responsibility for the care provided remains with the covered entity; and
3. The individual receives a health care service or range of services from the covered entity which is consistent with the service or range of services for which grant funding or Federally-qualified health center look-alike status has been provided to the entity. Disproportionate share hospitals are exempt from this requirement.
4. An individual will not be considered a “patient” of the entity for purposes of 340B if the only health care service received by the individual from the covered entity is the dispensing of a drug or drugs for subsequent self- administration or administration in the home setting.

Exception: An individual registered in a State operated AIDS drug purchasing assistance program receiving financial assistance under title XXVI of the PHS Act will be considered a “patient” of the covered entity for purposes of this definition if so registered as eligible by the State program. For more information, please refer to the October 1996 Final Notice Regarding Section 602 of the Veterans Health Care Act of 1992 Patient and Entity Eligibility.

Does the 340B discount apply to Medicaid patients or both Medicaid and Medicare?

Any patient of a participating 340B entity is considered a 340B eligible patient, regardless of payer status, provided the definition of a patient is followed

Can a covered entity use 340B drugs for patients with private insurance?

The 340B Program does not prohibit covered entities from providing 340B drugs to individuals with private insurance as long as the individual is a qualifying patient of the covered entity and the drug is not subject to a duplicate discount under Medicaid.

Are 340B prices available when purchasing inpatient drugs?

No. Section 340B pricing applies to covered outpatient drugs only.

What does OPA mean by a “ship to, bill to” arrangement?

The “ship to, bill to” arrangement refers to an arrangement set up by the covered entity who is responsible for purchasing 340B drugs from wholesalers and/or manufacturers and directs those 340B drugs to be shipped to the contract pharmacy. In other words, the covered entity maintains title of the 340B drugs as required, but the contract pharmacy(ies) houses the drugs and provides dispensing services to patients of the covered entity.

Is my covered entity required to submit our Medicaid/NPI number to the database for inclusion in the HRSA Medicaid Exclusion File?

Covered entities can choose whether they will use 340B drugs for their Medicaid patients. If they choose to do so, they must provide the Office of Pharmacy Affairs (OPA) with their pharmacy Medicaid Provider number, which is placed in the HRSA Medicaid Exclusion File. OPA makes the HRSA Medicaid Exclusion File available to state Medicaid agencies and manufacturers so that the state does not request a Medicaid rebate from a manufacturer for the already discounted 340B drugs. If an outpatient facility or sub-grantee/sub-contractor bills under a different Medicaid Provider Number or NPI than the parent site, those need to be appropriately listed with the sites.

What are the program benefits of the 340B Drug Pricing Program?

The most common benefit realized to the entity from 340B participation is that participating covered entities report savings that range between 25-50% of Average Wholesale Price (AWP) for covered outpatient drugs as a result of the 340B discounts. These savings can be converted into unrestrictive revenue for the organization.

What drugs are included under the 340B Drug Pricing Program?

An FDA-approved prescription drug, an over-the-counter (OTC) drug that is written on a prescription, and a biological product that can be dispensed only by a prescription (other than a vaccine) or FDA-approved insulin. Medical/surgical supplies (ex. syringes, etc.) are not covered drugs, but manufacturers may voluntarily give clinics a discounted price.

Is there a specific formulary for the 340B drugs?

There is no designated formulary for the 340B Program. Any manufacturer participating in Medicaid program must sign a Pharmaceutical Pricing Agreement (PPA) with the Secretary of the Department of Health & Human Services (HHS) and provide its drugs at or below the 340B ceiling price to 340B participating entities. Only 340B covered entities enrolled with the Office of Pharmacy Affairs have the ability to purchase at 340B prices, and the covered entity is responsible for 340B Program integrity. Therefore, a 340B enrolled entity must ensure that the 340B Program Definition of a Patient is met. Beyond meeting the patient definition described above, there is no definitive list of drugs that an entity may purchase. Decisions about the appropriateness of 340B drug purchases will ultimately be fact based on each unique situation