What Is the 340B Program and Can It Lower Your Costs?

The 340B Drug Pricing Program is a federal law that requires drug manufacturers to sell certain outpatient medications at a discount to qualifying hospitals and clinics, known as covered entities, that serve low-income and vulnerable patients (HRSA). These entities can then use the savings to expand services, though the discount does not automatically translate into a lower price at every patient's pharmacy counter. Prices vary by pharmacy, location, quantity, and eligibility, so it is still worth comparing prescription prices even when using a 340B-participating provider.

How the 340B program actually works

Congress created the 340B program in 1992 under Section 340B of the Public Health Service Act. It requires manufacturers that participate in Medicaid to offer covered outpatient drugs to eligible providers at or below a federally set ceiling price, calculated from the average manufacturer price minus a required rebate percentage. Total 340B drug purchases have grown from about $2.4 billion in 2005 to $66.3 billion in 2023, according to the Congressional Budget Office (CBO), and more than 2,600 hospitals participated as of January 2023 (KFF).

The program is not a direct subsidy. Instead, it lets qualifying providers buy drugs at a lower wholesale cost and then bill insurers, Medicaid, Medicare, or patients as they normally would. The gap between the discounted acquisition cost and the billed amount becomes revenue the entity is expected to reinvest in patient care.

Who qualifies as a covered entity

Two broad categories of providers can participate, and each has its own eligibility rules set by HRSA's Office of Pharmacy Affairs.

Hospital-based covered entities include six types: disproportionate share hospitals, children's hospitals, freestanding cancer hospitals, critical access hospitals, rural referral centers, and sole community hospitals. Most must meet a Medicare disproportionate-share adjustment threshold above 11.75 percent, tied to the share of low-income and Medicaid patients they serve, and must be government-owned or a qualifying nonprofit (HRSA).

Non-hospital covered entities qualify through federal grant funding rather than hospital-specific metrics. This group includes federally qualified health centers (FQHCs) and FQHC look-alikes, Ryan White HIV/AIDS Program clinics and state AIDS drug assistance programs, Title X family planning clinics, sexually transmitted disease clinics, tuberculosis clinics, black lung clinics, hemophilia treatment centers, and Native Hawaiian and Urban Indian health centers.

Does 340B actually lower what you pay

This is where the program gets complicated. The 340B discount reduces what the covered entity pays to acquire the drug, not necessarily what you are billed. A covered entity can charge insurers, Medicaid, or cash-paying patients its normal rate while still paying the lower 340B acquisition cost, and use that margin to fund charity care, sliding-fee discounts, or other services for the community (JAMA Health Forum scoping review).

That said, many safety-net providers do pass savings directly to patients, particularly through community health center sliding-fee programs and hospital charity-care policies. Some entities also operate an Eligible Patient Prescription Assistance Program, offering discounted medications at a flat rate such as a few dollars per prescription plus actual acquisition cost for patients under 200 percent of the federal poverty level, according to a National Association of Community Health Centers primer on health center pharmacy operations. Because pass-through savings are not guaranteed or standardized, always ask the specific hospital or clinic how their 340B program affects your bill before assuming a discount applies.

Why the program is controversial

Policy debates around 340B are ongoing. Drug manufacturers and their trade groups argue the program has drifted from its original patient-focused intent toward benefiting hospital and pharmacy bottom lines, while hospital groups and community health centers counter that savings fund charity care and expanded services in underserved areas (American Hospital Association). Some state legislatures have also debated contract pharmacy rules that affect how widely 340B drugs are distributed through retail pharmacy networks. None of this changes the basic mechanics of the discount, but it is a reason program benefits can look different from one covered entity to the next.

What to do if you think 340B could help you

Start by finding out whether your local safety-net hospital, community health center, or specialty clinic (such as a Ryan White HIV clinic) participates in 340B. If so, ask specifically:

• Does the 340B discount apply to my prescription, and how is it billed?
• Do you offer a sliding-fee scale or prescription assistance program for uninsured or underinsured patients?
• Is the discount available at your in-house pharmacy, a specific contract pharmacy, or both?

Compare prescription prices on BetterBuyRx alongside any 340B-linked pricing you are quoted, since a cash price or discount card at another pharmacy can sometimes be lower depending on the drug and your location.

Where 340B fits with other cost-lowering programs

340B is one piece of a larger landscape of affordability programs. It often overlaps with community health centers, state pharmaceutical assistance programs, and manufacturer or nonprofit patient assistance programs. None of these guarantee the lowest possible price for every drug, so comparing pharmacy prices directly remains a useful step even if you qualify for 340B-related savings.

Search your medication on BetterBuyRx to see how prices at nearby pharmacies compare, whether or not you use a 340B-participating provider.