340B Drug Pricing Program

Program Background

To understand why the 340B Drug Pricing Program is so vital, it’s important to consider its origins and the framework established by Congress. Congress created the 340B Drug Pricing Program in 1992 to require drug manufacturers participating in Medicaid to sell outpatient drugs to eligible healthcare organizations at steep discounts. The underlying premise was straightforward: hospitals and clinics treating large numbers of underserved patients should pay less for pharmaceuticals so they can stretch scarce federal dollars and offer more comprehensive care.

The Health Resources and Services Administration (HRSA), an agency of the Department of Health and Human Services (HHS), runs the program. Eligible covered entities include disproportionate share hospitals, federally qualified health centers (FQHCs), rural referral centers, sole community hospitals, critical access hospitals, children's hospitals, cancer hospitals, and other safety net providers. Participation requires registration with HRSA and ongoing compliance with program rules. 

Qualifying providers buy outpatient prescription drugs at discounts ranging from 20–50 percent below average wholesale price.¹ These savings would, in theory, get reinvested in patient services—expanded pharmacy operations, specialty clinics, and community health programs. The program is intended to help safety net providers stay financially viable while treating high numbers of uninsured and underinsured patients in underserved communities. Many rural hospitals and community health centers depend on 340B savings as a lifeline for maintaining operations and expanding services in medically underserved areas where other healthcare options are scarce.  

Challenges and the Need for Reform

Despite its important role in the healthcare safety net, the 340B program faces several significant challenges that have generated considerable debate among stakeholders.

Definition of a 340B Patient

According to HRSA, an individual may be considered a 340B patient only if (1) the covered entity has an established relationship with the individual, including that the individual has been recorded by the covered entity as receiving health care services; and (2) the individual receives health care services at the hands of a professional who is either employed by or under contract with the entity, including that the covered entity bears the responsibility of the care.² Some covered entities have interpreted this broadly to apply 340B discounts to patients with limited or even a single point of contact, thereby extending the program far beyond its original target.

Congress should establish a clear, statutory definition of a 340B patient that includes:

• A documented, ongoing care relationship between the patient and the covered entity; and
•  A recent, related healthcare service within the past 12 months; and
• Financial eligibility consistent with other federal safety-net programs.

Further, requiring 340B identification at the time of dispensing rather than retroactively would prevent entities from reclassifying prescriptions after the fact to maximize profits and would minimize the potential for duplicate discounts.

Limited Transparency and Weak Oversight

340B Program transparency and oversight falls short. Actual 340B discount prices remain confidential, making it impossible to verify whether manufacturers comply with required discounts.³ Covered entities face no requirements regarding how they can use 340B savings and have no obligation to report this information, leaving questions about whether funds support activities consistent with program goals. Covered entities should be required to publish aggregate 340B utilization data and show how savings benefit eligible patients and communities. Standardized reporting would strengthen program accountability without revealing competitively sensitive information. Additionally, HRSA’s oversight capabilities haven’t grown with the program, creating enforcement gaps. To address this, HRSA needs to be sufficiently funded to conduct regular compliance audits to validate 340B patient eligibility and how savings benefit eligible patients and communities. 

Program Benefits May Not Be Reaching Vulnerable Populations

Although the program allows hospitals and clinics to purchase medications at significantly reduced prices—often 20–50 percent lower than standard costs—many large hospital systems have kept the profit margins instead of reinvesting them into improving care for vulnerable populations. Research indicates that some 340B hospitals offer charity care below the national median, implying that the financial advantages of the program are not always used to support its intended safety-net mission. Without stricter requirements that connect 340B savings to measurable community benefits, the program risks becoming more of a revenue-generating tool for affluent systems rather than a crucial resource for underserved providers.⁴

A recent Government Accountability Office (GAO) report found that HRSA has no mechanisms in place to check if 340B savings are used to support vulnerable populations.⁵ Rather than investing in charity care or medication assistance programs, numerous hospitals redirect the income to unrelated administrative costs or expansion. Congress should require covered entities to show that 340B discounts have a quantifiable patient benefit, such as reduced out-of-pocket expenses, prescription drug subsidies, or community-based health services. For transparency and accountability, the value of these patient benefits should be publicly available. 

AMCP recommends focusing on reforms that preserve the program’s core mission while enhancing its value for patients and providers. 340B savings should fuel value-based care initiatives that boost quality while controlling costs.⁶ Covered entities should be required to maximize patient benefits from 340B savings by investing in medication therapy management, chronic disease programs, clinical services that improve outcomes for vulnerable populations, population health management, care coordination, and efforts to address social determinants of health in underserved communities.

Explosive Growth 

The rapid growth of the 340B Drug Pricing Program has sparked important questions about whether its current reach matches its original purpose. Originally created as a targeted safety-net program for providers caring for large numbers of uninsured and low-income patients, it has transformed through broadened eligibility and the increase in contract pharmacy agreements. 

HRSA defines a contract pharmacy as a pharmacy that partners with a covered entity to offer services to its patients, which includes dispensing 340B drugs owned by the entity.⁷ In 2020, several pharmaceutical companies limited 340B discounts for contract pharmacies, resulting in litigation. Court decisions resulted in rulings favoring drug manufacturers, with the U.S. Courts of Appeals for the Third and D.C. Circuits determining that the 340B statute does not require manufacturers to offer discounts to an unlimited number of contract pharmacies. As a result, manufacturers may limit the use of contract pharmacies. In response to these rulings, several states have introduced their own laws to protect the use of contract pharmacies for 340B entities, leading to further legal disputes.⁸ AMCP believes that HRSA should develop consistent regulations defining and limiting contract pharmacy relationships and requiring that contract arrangements directly and measurably help underserved patients.⁹

Duplicate Discounts

Preventing duplicate discounts is an important concern for the 340B program. A duplicate discount occurs when a manufacturer provides a 340B price reduction and then also pays a Medicaid rebate for the same drug claim.¹⁰ Despite the statutory prohibition on duplicate discounts¹¹ , duplicate discounts are an ongoing problem for the program. Duplicate discounts are frequently caused by gaps in data sharing between covered entities, pharmacies, state Medicaid agencies, and drug manufacturers which create opportunities for claims to be misclassified. AMCP believes that mandatory claim-level identifiers and real-time reporting would help to prevent duplicate discounts.

Conclusion

The 340B Drug Pricing Program plays a vital role in supporting healthcare access for vulnerable populations who rely on safety net providers. Program challenges demand attention, but reforms must strengthen—not weaken—the program's fundamental mission. AMCP backs evidence-based improvements that boost transparency and accountability while protecting access for patients who depend on safety net healthcare services. Ongoing collaboration among all stakeholders will be crucial for ensuring the program fulfills its intended purpose of stretching federal resources to help those who need it most.

Approved by the AMCP Board of Directors, February 2026

See also:

AMCP Legislative and Regulatory Positions

References:

¹ Mulligan, K. The 340B Drug Pricing Program: Background, Ongoing Challenges and Recent Developments (Oct. 14, 2021). Available at: https://schaeffer.usc.edu/research/the-340b-drug-pricing-program-background-ongoing-challenges-and-recent-developments/

² HRSA. Notice Regarding Section 602 of the Veterans Health Care Act of 1992 Patient and Entity Eligibility (1996). Available at: https://www.hrsa.gov/sites/default/files/hrsa/opa/patient-entity-eligibility-10-24-96.pdf 

³ Federal Register. 340B Drug Pricing Program Ceiling Price and Manufacturer Civil Monetary Penalty Regulation. Available at: https://www.gpo.gov/fdsys/pkg/FR-2017-01-05/pdf/2016-31935.pdf 

⁴ Conti RM, Bach PB. The 340B drug discount program: hospitals generate profits by expanding to reach more affluent communities. Health Aff (2014). Available at: https://pmc.ncbi.nlm.nih.gov/articles/PMC4591849/  

⁵ Government Accountability Office. “340B Drug Discount Program: Information about Hospitals That Received an Eligibility Exception as a Result of COVID-19 | U.S. GAO.” (2025). Available at:  https://www.gao.gov/products/gao-23-106095

⁶ Thomas, S, & Schulman, K. The unintended consequences of the 340B safety-net drug discount program (2020). Available at: https://pmc.ncbi.nlm.nih.gov/articles/PMC7080379/#_ad93_

⁷ HRSA. 340B Glossary. Available at: https://340bopais.hrsa.gov/help/Links/340B_Glossary.htm 

⁸ Congress.gov. The 340B Drug Discount Program: Litigation Topics and Trends (2025). Available at: https://www.congress.gov/crs-product/R48696 

⁹ Levengood, TW et al., “Assessing the Impact of the 340B Drug Pricing Program: A Scoping Review of the Empirical (2024). Available at: https://doi.org/10.1111/1468-0009.12691

¹⁰ Hardaway J. 340B Program Puts Manufacturers at Risk of Duplicate Drug Discounts. P & T (2016). Available at: https://pmc.ncbi.nlm.nih.gov/articles/PMC4699484/

¹¹ 42 USC § 256b(a)(5)(A)(i).