The 340B Drug Pricing Program

Congress created the 340B Drug Pricing Program in 1992 to shield safety-net providers from rising drug prices and help them care for low-income patients and communities. The program enables eligible hospitals and certain other safety-net providers to purchase outpatient drugs at a discount from pharmaceutical manufacturers and leverage those savings to better care for their patients and communities. By design helping them stretch “scarce federal resources as far as possible, reaching more eligible patients and providing more comprehensive services.” For more than 30 years, the 340B program has allowed safety-net providers, many of which are teaching hospitals, to maximize their limited financial resources and better care for patients and communities, all at minimal direct cost to the taxpayer.

How does it work?

Section 340B of the Public Health Service Act requires pharmaceutical manufacturers to provide discounts to eligible safety-net providers in exchange for having their drugs covered under Medicaid and Medicare Part B. Safety-net providers that are eligible for these discounts are referred to as “covered entities” and include six types of hospitals: children’s hospitals, critical access hospitals, disproportionate share hospitals, freestanding cancer hospitals, rural referral centers, and sole community hospitals.

340B covered entities are entitled to discounted pricing on covered outpatient drugs. Through these discounts, 340B covered entities can achieve savings, which are used to preserve, expand, and enhance access to care for patients and communities. AAMC-member teaching hospitals reinvest their 340B savings in a variety of ways, including:

• Ensuring access to life-saving health care services, particularly in rural and medically underserved areas.
• Supporting programs that address the nonclinical drivers of health, such as medication management, nutrition support, housing, and legal services.
• Maintaining and expanding critical (yet under-resourced) services, such as mental and behavioral health care, substance use disorder treatment, and labor and delivery.

Learn more about how AAMC-member institutions use their savings to benefit low-income and historically under-resourced patients and communities (PDF).

Why Protect 340B?

• 340B is a small program with significant benefits. While the program accounts for less than 5% of drug companies’ global revenues (PDF), it plays an outsized role in our nation’s health care safety net, helping to maintain and expand access to care for millions of low-income patients.
• 340B costs almost nothing to the taxpayer. Because 340B savings are provided directly through pharmaceutical manufacturers, the 340B program operates at minimal direct cost to the taxpayer.
• 340B supports safety-net hospitals through financial headwinds. From historic workforce shortages to inflationary pressures, teaching hospitals face serious financial challenges. The 340B program supports AAMC-member institutions’ continued ability to uphold their missions and care for low-income and historically under-resourced patients and communities.