What Health Plan Sponsors Need to Know about the 340B Program

  1. The 340B discounts are not taken from U.S. tax dollars. The 340B program is a federal drug discount program, requiring manufacturers to offer statutorily determined discounts, which often represent a 25-50% savings, as a condition of Medicaid Drug Rebate Program (MDRP) participation. The 340B Program is overseen by the Health Resources & Services Administration’s (HRSA’s) Office of Pharmacy Affairs.
  2. 340B discounts are available to covered entities, NOT specific patients. Covered entities include: Federally Qualified Health Centers, Ryan White HIV/AIDS Program Grantees, children’s hospitals, critical access hospitals, disproportionate share hospitals (DSHs), free-standing cancer hospitals, sole community hospitals, black lung clinics, comprehensive hemophilia diagnostic treatment centers, Title X Family Planning Clinics, sexually transmitted disease clinics, and tuberculosis clinics https://www.hrsa.gov/opa/eligibility-and-registration/index.html
  3. What is the definition of a 340B-eligible patient? To be eligible to receive 340B-purchased drugs, patients must receive healthcare services other than drugs from the 340B covered entity. The only exception is patients of state-operated or state-funded AIDS drug purchasing assistance programs. An individual is a patient of a 340B covered entity (with the exception of state-operated or state-funded AIDS drug purchasing assistance programs) only if:
  • The covered entity has established a relationship with the individual, such that the covered entity maintains records of the individual’s healthcare; and
  • The individual receives healthcare services from a healthcare professional who is either employed by the covered entity or provides healthcare under contractual or other arrangements (e.g., referral for consultation) such that responsibility for the care provided remains with the covered entity; and
  • The individual receives a healthcare service or range of services from the covered entity that 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. DSHs are exempt from this requirement.


**An individual will not be considered a patient of the covered entity if the only healthcare 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: Individuals registered in a state-operated or state-funded AIDS Drug Assistance Program (ADAP) that receives Federal Ryan White funding ARE considered patients of the participant ADAP if so registered as eligible by the State program.

Reference: Final Notice Regarding Section 602 of the Veterans Health Care Act of 1992 Patient and Entity Eligibility


  1. The intent of 340B is to benefit safety net providers so they can stretch scarce federal resources as far as possible, reaching more eligible patients and providing more comprehensive services. An oft-stated problem with the program is some payers take 340B savings or reimburse lower fees to 340B Covered Entities, which is not consistent with the intent of the program.
  2. There are two basic compliance requirements for organizations that participate in 340B, and they include: 1) Which patients may receive 340B drugs, and 2) Ensuring manufacturers do not pay a Medicaid rebate and a 340B discount on the same drug (duplicate discount).
  3. HRSA has policy to help stakeholders prevent duplicate discounts in fee-for-service Medicaid, and this includes a public database of Medicaid purchasing decisions. https://340bopais.hrsa.gov/medicaidexclusionfiles
  4. Each state Medicaid agency may have additional policy to help identify 340B drugs in order to prevent duplicate discounts, for example, some states require modifiers to be attached to 340B claims so the state can remove the claims from MDRP files. The reference document is the AMP Rule: https://www.federalregister.gov/documents/ 2016/02/01/2016-01274/medicaid-program-covered-outpatient-drugs. CMS requires states to address 340B in state reimbursement policy (reimbursing at Average Acquisition Cost).
  5. HRSA has not published specific policy on managed care Medicaid (see Page 3 language: https://www.hrsa.gov/sites/default/files/opa/programrequirements/policy releases/clarification-medicaid-exclusion.pdf). CMS policy requires must have procedures in place to exclude 340B utilization in order to prevent duplicate discounts. https://www.gpo.gov/fdsys/pkg/FR-2016-05-06/pdf/2016-09581.pdf


For additional information or assistance in crafting CMS- and HRSA-compliant 340B claim disposition policies, contact the Gorman Health Group Pharmacy Solutions team.



Stay connected to industry news and gain perspective on how to navigate the latest issues through GHG’s weekly newsletter. Subscribe

No Comments Yet

Leave a Reply

Your email address will not be published.