What is 340B?

If you’re not deeply entrenched in the pharmacy world, you probably haven’t heard the phrase “340B.” But in recent years, the 340B program, created in 1992 under the Public Health Service Act, has been the subject of a lot of back-and-forth between drugmakers, hospitals, and the federal government.

What is it? The 340B program requires Medicaid-participating drugmakers to sell drugs at discounted prices to certain hospitals and clinics.

How good of a deal are we talking? And who gets it? Hospitals and clinics that participate in the program are called “covered entities,” and treat a large number of low-income, uninsured patients. Those facilities can receive a 25%–50% discount, according to the trade group the American Hospital Association (AHA).

But why? The idea is that since those facilities primarily treat low-income and uninsured patients, the covered entities have limited financial resources. Further, a drug discount would help hospital and clinic administrators stretch their resources to provide care for more patients.

Sounds simple enough, right? Well, not everyone loves the program.

On one side: Drugmakers expressed doubt over whether the discounted prices actually contribute to improved care for low-income patients, according to the Commonwealth Fund, a nonprofit focused on health policy research. Drugmakers also expressed concern that the program is growing too fast, which means they lose out on more money.

On the other side: The covered entities argue that most care for uninsured patients goes uncompensated, and the discounts drugmakers give on drugs through the 340B program are pretty small compared to drugmakers’ overall profits, according to the Commonwealth Fund.

The Supreme Court even ruled on a 340B-related case in 2022, after the Department of Health and Human Services lowered 340B payments to hospitals and the AHA filed a countersuit arguing that the cuts were unlawful. The Supreme Court sided with the AHA.

There are still a number of 340B-related lawsuits pending, and a House panel approved legislation in May that would add new requirements for covered entities, like reporting how much charity care the entities provide. So, the 340B landscape is ever-changing.