Welcome to the basics of the 340B Program
What is 340B: Section 340B of the Public Health Services Act was created under Section 602 of the Veterans Health Care Act of 1992. Section 340B requires manufacturers participating in the Medicaid program to enter into a pharmaceutical pricing agreement with the United States Department of Health and Human Services (HHS). Under such an agreement, individual manufacturers agree to provide discounted prices to certain defined “covered entities” for covered outpatient drugs. These “covered entities” typically serve more vulnerable patient populations.
By enacting Section 340B in 1992, Congress intended to remedy a situation created by the earlier enactment of the Medicaid rebate program in 1990. More particularly, as a result of the 1990 Medicaid rebate program, drug manufacturers were required to enter into rebate agreements with HHS as a precondition for Medicaid covering their drugs. Pursuant to these agreements, Medicaid could (and still can in certain situations) seek rebates from manufacturers for drugs they have covered (provided reimbursement for). These “back-end” drug rebate discounts, however, were based in part on the manufacturers’ “best prices” to non-Medicaid providers for these drugs. As a result, the lower a manufacturer’s best price for a particular drug, the higher the Medicaid rebate for that drug would be. Obviously, this left little incentive for manufacturers to offer low “best prices”. Not surprisingly, many manufacturers began raising their “best prices”, resulting in increased government spending for drugs purchased by other non-Medicaid government-supported providers. This seemingly undermined the benefits from the drug rebates enjoyed by Medicaid. Congress therefore enacted Section 340B in 1992, thus allowing the “front-end” discounted outpatient drug prices to defined “covered entities.”
What does 340B do?
A good place for additional information is the SNHPA Website.