Revenue Cycle
and Billing

The 340B Drug Pricing Program is Vital to US Health Equity Efforts

by | Jan 19, 2022 | Government Programs, Health, Health Equity, Public Health, Ryan White HIV/AIDS

The 340B program allows qualified providers, called covered entities, to buy outpatient prescription drugs at a discounted price, known as the “best price” on the market. The average savings in pharmacy costs for covered entities is between 25-50%, according to the Health Resources & Services Administration (HRSA), which administers the program. 

Covered entities use the money they save to offer free or low-cost drugs and services to their patients. The 340B drug pricing program is threatened right now, which puts many covered entities at risk, as well as the patients and communities they serve. 

What is a Covered Entity?

HRSA specifies which covered entities are eligible for the 340B program. They include certain hospitals, specialized clinics, health centers, and Ryan White HIV/AIDs Program Grantees. See the table below for a full list of eligible covered entities, defined by Section 340B(a)(4) of the Public Health Service Act.

How the Program Works

Drug makers that participate in the Medicaid program must sell outpatient drugs to eligible covered entities at discounted prices. The covered entities can then offer the drugs at low or no cost to their patients. If a patient has insurance, the entity can bill the insurance company at full price for the drug. They can bill Medicare, Medicaid, and private insurers. 

The savings generated are critical for covered entities. According to HRSA, “The 340B Program enables covered entities to stretch scarce federal resources as far as possible, reaching more eligible patients and providing more comprehensive services.”

340B Programs Impact Their Communities

340B programs throughout the country are positively impacting the communities and patients they serve. Health centers are able to offer prescriptions at much lower prices. The services offered are vital for patients who have no insurance and suffer from complex, chronic health conditions, and who otherwise would not be able to afford the medications. 

The National Association of Community Health Centers shares how health centers are using the savings to impact the needs of those they serve. Here are three health center success stories

  • The Kintegra Health Center in North Carolina provides nearly 420,000 affordable medications to 30,000 uninsured patients to expand primary care, behavioral health, dental, and supportive services to 11,250 new patients. 
  • The funding allows Pennsylvania’s Keystone Health to provide financial support for HIV services, as well as family practice, internal medicine, and women’s care services. 
  • Great Salt Plains Health Center in Oklahoma uses the savings to supply large quantities of inhalers, which would have otherwise been unaffordable, to respirator patients.

340B Hospitals Rely on the Program to Provide Needed Care to Vulnerable Patients

Each year, 340B Health surveys its 1,300 member hospitals. According to the 340B Health 2020 Annual Report, to which 500 hospitals responded: 

  • 75% of critical access hospitals, defined as having 25 beds or fewer and located more than 35 miles from another hospital, rely on 340B program funding to keep their doors open.
  • More than 50% of respondents are using 340B program savings to support COVID-19 efforts.  
  • 100% of disproportionate share hospital (DHS) respondents said they used their 340B program savings to support care for low-income and rural patients (see figure below).. 
    • The report defines disproportionate share hospitals as rural referral centers (RRCs), and sole community hospitals (SCHs) that also must meet a DSH threshold.

Source: 340B Health 2020 Annual Report

The 340B Drug Pricing Program is Under Attack

The 340B program has been in the news recently due to lawsuits filed by drug companies and countersuits filed by the Department of Health and Human Services and HRSA. Drug companies question how much of the savings generated by the program actually benefits patients, so they are imposing restrictions on sales of 340B-discounted products to the contract pharmacies used by covered entities to dispense drugs to patients.  

Drug companies and others also criticize the lack of supervision and accountability over the 340B program. And some physicians believe the discounts offered through the program put them at a competitive disadvantage (Community Oncology Alliance).

The 340B program’s administrative dispute resolution (ADR) process is also an issue. In December, the Biden administration announced it would soon roll out a new rule that “better aligns” with its drug pricing priorities.

The 340B Pricing Program Meets Vital Needs

The 340B program serves many at-risk individuals who otherwise would not have access to care or be able to afford life sustaining medications. The issues and lawsuits need to be resolved quickly to ensure that patients who benefit from program-generated savings continue to receive medicines and critical health services. 340B program efforts go a long way to support health equity.  

About American Exchange

American Exchange works with health departments, community-based organizations, and 340B covered entities to enroll Ryan White clients in Affordable Care Act (ACA) marketplace plans on- and off- exchange.

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