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The federal government’s 340B Drug Pricing Program was launched in 1992 as a way to assist safety-net healthcare providers in their efforts to stretch federal healthcare resources as far as possible. In just over 30 years, the program has given covered entities access to hundreds of billions of dollars in discounted drugs.

The big question is this: who does the 340B discount drug program actually help, and how? It is an important question to answer given the fact that the discounts covered entities receive under the program are not the direct result of federal funding. They are discounts provided directly by pharmaceutical companies.

How the Program Works

Under 340B rules, pharmaceutical companies that sell prescription drugs to the federal government must apply the same discounts they give to government agencies to those covered entities enrolled in the program. So if a pharmaceutical company sells a particular drug to the military at a discount, it must provide that same drug and discount to a hospital enrolled in 340B.

Discounts do not apply to every drug under the sun. They only apply to certain outpatient drugs. As such, the savings covered entities enjoy under 340B are limited to a small number of drugs that also happen to be among the most widely dispensed prescription meds.

As for healthcare providers, 340B eligibility requirements dictate they already receive federal funding to support their efforts to provide healthcare services to underserved populations. It is typical for a covered entity to enlist the help of a 340B Drug Pricing Program Consultant like Ravin Consultants to implement and manage their 340B programs. Comprehensive 340B consulting services cover everything from program implementation to regulatory compliance to 340B audits.

Covered Entities and Patients Benefit

In terms of who the 340B program actually helps, we will start with the covered entities themselves. The vast majority of 340B savings benefit disproportionate share hospitals. These are hospitals that provide a disproportionate share of their services to underserved communities. They are by far the largest recipients of the program’s discounts.

In theory, they are helped by being able to use their federal resources for things other than obtaining prescription medications. And in fact, that is a primary expectation of the program. Covered entities are supposed to channel their savings into providing more accessible care to those in need.

A couple of examples cited by The Hill’s Rick Pollock include:

  • John Hopkins – Maryland’s John Hopkins Hospital channels its savings into discounted outpatient drug programs, telephone consultations, home visit services, and patient transportation.
  • Mount Carmel – Ohio’s Mount Carmel Health system utilizes some of its savings to provide free urgent care to the uninsured and underinsured.
  • Henry Ford Health – Michigan’s Henry Ford health uses some of its discount savings to cover embedded pharmacists and fund medication services, including home delivery.

In theory, patients benefit as well through access to low or no-cost prescription medications. It is understood that covered entities will not turn around and sell the discounted drugs they obtain through 340B at retail price. But they can and do. There is no prohibition against retail pricing.

A Lot Of Money Saved

There is no arguing that the 340B program has resulted in tremendous financial savings. Covered entities receive discounts worth tens of billions of dollars annually. That is a lot of money being saved.

On the other hand, pharmaceutical companies are losing revenue in the process. In order to maintain their margins, it is likely they are inflating prices on other drugs to cover the discounts they must offer under 340B. Who pays those higher prices? Let us leave that question for you to answer on your own.