By Lori McGinley, Vice President of Pharmacy Management, PharmD on Demand

The evolution of the 340B Pharmacy Program has been shown to improve patients’ quality of life while simultaneously supporting the financial and regulatory health of the organization serving them. These 340B-covered entities use in-house pharmacies owned by the entity to both help patients obtain affordable medications and maximize the financial benefits. 

The results can make a big difference. Through August of this year, our 340B facilities have saved more than $5 million on their drug costs. For many healthcare facilities, the savings can help balance a budget while treating more patients in the community they serve. 

Who does the 340B program apply to, and what does a successful 340B program look like in practice? Let’s take a look.

Is Your Entity Covered?

To launch a 340B program at your facility, make sure it meets the guidelines set up by the Office of Pharmacy Affairs within the Health Resources and Services Administration (HRSA). Remember, the intent of the program is to provide discounted drugs to covered entities so they can offer more comprehensive services to indigent patients.  

As such, covered healthcare entities include:

  • Disproportionate Share Hospitals: To qualify, a facility must have a Disproportionate Share Adjustment percentage greater than 11.75 percent. Also, the covered entity cannot purchase covered outpatient drugs through a GPO Account.
  • Critical Access Hospitals: These hospitals are designated by the Center for Medicare and Medicaid Services (CMS). They are subject to orphan drug exclusion, and they must request permission from manufacturers and have a letter on file in order to purchase orphan drugs at 340B pricing.
  • Sole Community Hospitals: These facilities, also designated by CMS, must have a Disproportionate Share Adjustment percentage greater than or equal to 8 percent. They are also subject to the same orphan drug exclusion as critical access hospitals.

Hospitals that fall into one of these categories still have a few more hurdles to clear. For a hospital to qualify for the 340B program, they also must be owned or operated by either a state or local government or a public or private non-profit corporation that is formally granted governmental powers. 

Private, non-profit hospitals that have a contract with a state or local government to provide healthcare services to low-income individuals who are not entitled to benefits under Title XVIII of the Social Security Act also qualify. 

Are Your Patients Eligible?

Patients who may receive 340B-priced drugs are also clearly defined by HRSA. For one thing, patients are ineligible if the only service they receive from your facility is the administration of the drug in question. 

To qualify for 340B, eligible patients must have an established relationship with the covered entity and receive healthcare services from a health professional employed by the covered entity — or one who provides healthcare services under contract.

Patients must also be of outpatient status and receive healthcare services that are consistent with the services that the funding covers.

Crucially, it’s the covered entities that determine who will be considered indigent patients and what level of benefits these patients will receive.

Staying in Compliance

There are a few issues that can derail your 340B program. One of the biggest is when diversion occurs, resulting in a 340B drug being dispensed or administered to an ineligible patient. 

To keep diversion to a minimum, monthly audits are imperative. These audits can help ensure the 340B-eligible patients are receiving their 340B drugs from an eligible provider at an eligible location. and duplication of discounts are chief among them.   

Another issue that can plague 340B program management is the occurrence of duplicate discounts. This happens when 340B pricing and a Medicaid rebate are applied to the same drug. To avoid incidents like this, the covered entity must determine if they will bill Medicaid for the administration of 340B drugs. It’s a question of carving in versus carving out.  

If an entity chooses to carve-in and use 340B drugs for Medicaid patients, they

must take measures to ensure Medicaid discounts are not also applied, creating the duplicate discount. The entity must submit a list of National Provider Identifier (NPI) numbers to the Medicaid Exclusion File on the HRSA website.

If the covered entity chooses to carve out Medicaid, it will never bill Medicaid for 340B drugs and does not dispense 340B drugs to Medicaid patients. Drugs for Medicaid patients will be dispensed from non-340B stock, which means that claim will be eligible for a Medicaid rebate.

Keeping Your 340B Program Going

There is a misconception in our industry that it can be too hard for some eligible covered entities to maintain 340B compliance. That being said, there are examples across the country of providers and healthcare facilities — not to mention their patients — who have benefited greatly from the 340B program. 

To ensure your 340B program stays up to date, keep these regular checklist items handy:

  • Registration and Recertification: Covered entities may register themselves on the HRSA website during the registration periods, which occur Jan. 1-15, April 1-15, July 1-15 and Oct. 1-15. They must go through the recertification process annually. 
  • Monitor your HRSA site: Verify that your HRSA site is up-to-date with your Authorizing Official and Primary Contact. Make sure your covered entity’s, child site(s) and contract pharmacy’s addresses are accurate.
  • Monthly Audits: To ensure continued compliance, do a monthly audit of your program. This will keep you prepared in case of an HRSA audit.

How We Can Help

While 340B certainly is an added layer of responsibility for pharmacy staff — who are often not familiar with the intricacies of the 340B system — PharmD On Demand’s comprehensive 340B solutions provide consulting and a customized service platform to help covered entities maintain compliance.

We help in-house pharmacies carry on their core duties by creating efficient plans for comprehensive pharmacy management and 340B oversight. This oversight includes both internal 340B-eligible pharmacies as well as external contract pharmacy relationships.  

Our services capitalize on opportunities to use or expand your in-house 340B pharmacy to maximize post-acute compliance and improve outcomes, all the while maximizing savings, serving vulnerable populations and providing the highest level of value-based patient care.

To learn more, visit our 340B Program Management page and reach out to me with any questions. You can email me at