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The 340B Drug Discount Program: A Functioning but Tangled Safety Net Program

The 340B Drug Discount Program: A Functioning but Tangled Safety Net Program

Conceptually, the 340B Drug Discount Program was created on the shoulders of those who wanted to bring the absolute best pricing for the medications needed for the disadvantaged. This altruistically designed legislation is composed of three essential components: The Covered Entities, the participating 340B Pharmacies, and the Drug Manufacturers. The issue lies in how to make all three components adhere to an acceptably coordinated system that ultimately benefits and enhances patient care.

The 340B program is a vital source of support for many Rural Medicaid Clinics, Hospitals, and Community Health Centers. The deeply discounted drug pricing that these entities benefit from allows them to use the savings to create and support programs that have a profound benefit for a large portion of their patient population. Many, if not the vast majority, of these 340B Covered Entities do not have their own pharmacy and rely on participating contracted 340B external pharmacies to deliver the needed medications. The highly skilled, contracted 340B Pharmacies act as agents of the Covered Entity and Drug Manufacturers within the program, and Drug Manufacturers are directed to comply with the highly discounted pricing that is at the epicenter of the program.

The problem lies in how the program is regulated. One key issue is the lack of controls in the covered entities who can bill

Medicaid. Only at a much later time it is determined that the patient is also qualified under 340B and thereby the Covered Entity receives an additional rebate. Conversely, better controls are needed to ensure that only qualifying patients are receiving the benefit of the 340B program. Although difficult, my experience with 340B pharmacies while representing them as an M+A advisor has shown them to execute this task masterfully.

The 340B program is growing, and Drug Manufacturers are litigating against it as it now exists. The newly appointed HHS Secretary, Xavier Becerra, has supported the 340B program in the past, and with basic control changes, it can be a profound healthcare benefit. The program’s future is still not anchored, but I believe this program will remain in place.

This article was written by David Feuer, a leading M&A pharmacy Advisor in sales at American Healthcare Capital. He can be reached at

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