340B Drug Pricing Program
Last reviewed · By Chad Griffith
The 340B Drug Pricing Program at Section 340B of the Public Health Service Act (42 USC 256b) requires drug manufacturers participating in Medicaid to provide outpatient drugs to eligible 'covered entities' at significantly reduced prices. Covered entities include disproportionate share hospitals, federally qualified health centers (FQHCs), Ryan White HIV/AIDS clinics, hemophilia treatment centers, and certain other safety-net providers. Participation produces savings often 25-50% below average wholesale price, which covered entities use to expand patient services and provide discounted care. Compliance requires careful tracking of patient eligibility, drug acquisition, prescription fulfillment, and prevention of duplicate discounts (claiming both 340B pricing and Medicaid rebates on the same drug).
Frequently Asked Questions
What entities are eligible for 340B?
15 categories of covered entities include: disproportionate share hospitals (DSH) meeting specific Medicaid utilization thresholds; federally qualified health centers (FQHCs); Ryan White HIV/AIDS Program grantees; Native Hawaiian Health Centers; Tribal/Urban Indian Health Centers; hemophilia treatment centers; family planning clinics; STD clinics; tuberculosis clinics; black lung clinics; rural referral centers; sole community hospitals; critical access hospitals; children's hospitals; freestanding cancer hospitals. Each category has specific eligibility criteria and participation requirements.
What is the duplicate discount prohibition?
Section 340B(a)(5)(A)(i) prohibits manufacturers from being required to provide both a 340B discount and a Medicaid rebate on the same drug. Covered entities must implement systems to prevent duplicate discounts — typically by carving out Medicaid utilization (excluding Medicaid prescriptions from 340B claims) or carving in (claiming 340B and notifying the state Medicaid agency to exclude from rebate calculation). Duplicate discount findings are among the most-cited HRSA audit findings and can result in repayment to manufacturers and removal from the program.
What is the patient definition for 340B?
HRSA's longstanding definition: a 'patient' of the covered entity is an individual whose primary care relationship with the covered entity establishes them as eligible for 340B drugs. The patient definition has been the subject of ongoing litigation — manufacturers have challenged covered entity practices that they argue extend 340B beyond the statutory intent. As of 2026, multiple court decisions and proposed HRSA rulemaking are reshaping the patient definition. Covered entities must follow the most current HRSA guidance and be prepared for evolving requirements.
What records must 340B covered entities retain?
Required records include: drug acquisition records (purchase orders, invoices showing 340B-acquired drugs), prescription dispensing records (typically through the entity's pharmacy or contract pharmacy network), patient eligibility records (demonstrating each patient meets the patient definition), Medicaid utilization records (for duplicate discount prevention), self-audit and corrective action records. Retention periods are typically 5+ years to align with HRSA audit lookback periods. Insufficient documentation has been the basis of multi-million-dollar repayments and program removal in HRSA enforcement actions.
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