Key insights
- The 340B program is quite complex and evolving. It’s designed to help health care providers serve specific populations by offering outpatient drugs at reduced prices.
- There are a lot of disputes and potential legislative actions surrounding 340B, like conflicts between pharmaceutical companies and covered entities, and various proposals for improving program integrity, transparency, and accountability.
- Covered entities should focus on compliance requirements, program management, and operational efficiencies. One key compliance example is having a required annual, independent audit.
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Period of ongoing conflicts, potential legislation
340B Eligible covered entities
Federally qualified health centers
- Health center program award recipients
- Health center program look-alikes
- Native Hawaiian health centers
- Tribal and urban Indian health centers
Ryan White HIV/AIDS Program Grantees Hospitals
- Children's hospitals
- Critical access hospitals
- Disproportionate share hospitals
- Free-standing cancer hospitals
- Rural referral centers
- Sole community hospitals
Specialized clinics
Conflicts over the 340B program have only intensified over the past few years. Pharmaceutical companies lament program growth and using contract pharmacies. For covered entities, concerns center around pharmaceutical companies bypassing the Health Resources and Services Agency (HRSA) and setting up their own program requirements.
Disputes on both sides have led to lawsuits, state-level enactment of laws, and various federal proposals related to:
- Program integrity — Proposals to implement stricter eligibility criteria and enhancing oversight mechanisms.
- Transparency and accountability — Proposals for increased transparency from both covered entities and pharmaceutical manufacturers.
- Manufacturers — Proposals to penalize drug manufacturers that do not comply with 340B pricing requirements so covered entities can access discounts.
Do you know HRSA requires an independent audit of an entity’s contract pharmacy program?
Years of action and counter-action among stakeholders has led to a complicated web of regulations, state laws, lawsuits, and pharmaceutical company requirements.
The new Congress and administration may decide to take action. Setting the stage for potential action this year was the release of a discussion draft in 2024 by a bipartisan group of senators. Their preliminary draft was titled the “SUSTAIN Act.”
The draft covered key points of contention related to contract pharmacies, patient definition, and child sites. The draft looked at these and other topics from a bipartisan perspective while seeking stakeholder feedback from all sides. The senators did not introduce the SUSTAIN Act, but their preliminary work could help flesh out a broader compromise package for this Congress.
340B program importance
The 340B drug discount program is aimed to help address the cost of pharmaceuticals for providers serving specific populations. It was enacted in 1992 and expanded under the Affordable Care Act. The program mandates pharmaceutical manufacturers offer outpatient drugs at reduced prices to eligible health care organizations, known as covered entities, if they want to participate in Medicaid and Medicare Part B.
340B program assistance
- Is your covered entity comfortable with its 340B compliance work?
- Do you need assistance on your annual audit requirement?
- Wonder how to make your 340B program more efficient?
CLA can help.
The primary goal of the 340B program is to stretch scarce federal resources as far as possible, reaching more eligible patients and providing comprehensive services. By purchasing discounted drugs, the savings allow these entities to invest in initiatives such as preventive care, medication adherence, infusion services, community outreach, and more.
The impact of the 340B program can be profound. For example, rural hospitals may find the program a lifeline to providing essential drugs and services in areas where health care options are limited. The program can help keep the doors of an entity open.
Important audit requirements, program operations
Due to the program’s importance and complicated legal-legislative-regulatory environment, covered entities should seek ways to stay compliant, have a well-managed operation, and improve efficiencies.
One key compliance requirement is the HRSA expected independent annual audit. An outside firm can provide the independent audit and also help you stay current with program updates.
For example, beginning January 1, 2025, 340B covered entities will need to transition to the TB modifier. This also includes work to identify/strengthen controls related to key 340B program areas — Patient Definition, Location Eligibility, Diversion, Duplicate Discounts, Contract Pharmacy, and more.
How CLA can help you with 340B programs
Compliance, operational improvements, and efficiency are tools covered entities can use to keep their 340B programs running smoothly. Having an ally on your side can help with:
- Patient definition
- Location eligibility
- Purchasing/inventory
- Medicaid/duplicate discounts
- Diversion
- GPO prohibition
- Program eligibility and assessments
- Program improvements to operations and management
- Annual REQUIRED independent compliance audit requirement
- Contract pharmacy procedures, including duplicate discounts
- Orphan drugs
CLA’s 340B policy and reimbursements advisors understand the complexity of 340B and can assist you. If you need any of the above services or have other 340B questions, reach out today.
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