The 340B Drug Pricing Program

Congress created the 340B Drug Pricing Program in 1992 to protect safety-net hospitals from escalating drug prices by allowing them to purchase outpatient drugs at a discount from manufacturers. The program enables eligible hospitals to serve their communities by stretching “scarce Federal resources as far as possible, reaching more eligible patients and providing more comprehensive services.”

340B Is Critical to Safety-Net Hospitals and Their Patients

Download infographic (PDF) illustrating how hospitals utilize savings from 340B to provide services for their patients. 

AAMC Comments on CY 2023 OPPS Proposed Rule, Urges Restored Payment for 340B Hospitals

The AAMC submitted comments on the CY 2023 OPPS proposed rule, urging the CMS to restore reimbursement for drugs acquired through the 340B program in light of the Supreme Court’s decision in AHA v. Becerra.

Sept. 16, 2022

House Holds Special Order Hour Commemorating the 340B Drug Pricing Program

Reps. Spanberger and John Rose (R-Tenn.) held a special order hour commemorating the 30th anniversary of the 340B Drug Pricing Program, during which members of the House of Representative shared the positive impact the program has had on patients, communities, and providers in their districts.

June 7, 2022

JAMA Network Open Article Finds No Statistically Significant Association Between 340B Program Participation and Medicare Part B Drug Spending

Despite claims that the 340B program incentivizes hospitals to prescribe more expensive drugs, a recent article published in JAMA Network Open found that, after controlling for beneficiary-level risk factors and hospital-level characteristics, there is no statistically significant difference in Medicare Part B spending between 340B hospitals and non-340B hospitals.

Feb. 18, 2022

AAMC Endorses Legislation to Protect 340B Hospitals

The AAMC submitted a letter of support to Reps. Abigail Spanberger (D-Va.) and David McKinley (R-W.Va.) for the bipartisan Preserving Rules Ordered for the Entities Covered Through (PROTECT) 340B Act of 2021 (H.R. 4390), legislation that would shield 340B hospitals from discrimination by commercial insurers and pharmacy benefit managers.

July 13, 2022

AAMC and Others Demonstrate Support for the 340B Program

The AAMC joined five other hospital associations in a letter to congressional leadership expressing strong support for the 340B program and highlighting its role in controlling the growth of drug prices.

Sept. 24, 2021

AAMC Urges Enforcement Action Against Drug Companies That Deny 340B Discounts

The AAMC and five other organizations representing hospitals and pharmacists sent a letter to Health and Human Services (HHS) Secretary Xavier Becerra urging the department take immediate action to prevent six drug companies from refusing to provide statutorily mandated drug discounts to 340B hospitals that dispense drugs through community pharmacy arrangements.

April 20, 2021

Supreme Court Decision on Reimbursement Cuts to 340B Hospitals

Background: In 2017, the Centers for Medicare & Medicaid Services (CMS) issued their calendar year (CY) 2018 Outpatient Prospective Payment System (OPPS) final rule, which reduced Medicare reimbursement rates for drugs acquired under the 340B program by nearly 30%. The AAMC and other hospitals and hospital associations subsequently filed a lawsuit to reverse the cuts, asserting that the action violated the Social Security Act, Section 340B of the Public Health Service Act, and the Administrative Procedure Act. The district court initially found in favor of the hospitals, concluding that the HHS had acted outside of its authority. The case was appealed to the U.S. Court of Appeals for the District of Columbia, which issued a split decision in favor of the federal government. The court cited the Chevron precedent, which states that, in some cases, the courts must defer to an agency’s statutory interpretation, unless said interpretation is unreasonable. In July 2021, the U.S. Supreme Court agreed to consider the case, with oral arguments heard in November 2021.

Latest Updates: On June 15, 2022, the Supreme Court issued an opinion in the case of American Hospital Association (AHA) v. Becerra. In a unanimous decision, the court ruled in favor of the hospitals, deciding that because the HHS did not conduct a survey of hospitals’ acquisition costs, the department acted unlawfully by reducing hospital reimbursement rates for 340B-acquired drugs. Following this victory, the AAMC, the AHA, and America’s Essential Hospitals issued a joint statement celebrating the court’s opinion.

On Sept. 28, 2022, the U.S. District Court vacated the CY 2022 OPPS rule to the extent that it reduced Medicare Part B payments for 340B-acquired drugs, contrary to the Supreme Court’s holding. On Oct. 13, 2022, the CMS announced that it will pay Average Sales Price plus 6% for certain 340B outpatient drugs for the rest of CY 2022 and will reprocess claims paid on or after Sept. 28, 2022.

The determination of remedies covering underpayments in 2018 through Sept. 27, 2022, awaits further court proceedings. The CMS will finalize the payment rate for CY 2023 when it publishes the CY 2023 OPPS final rule.

Oct. 14, 2022

AAMC Joins Amicus Briefs Supporting HHS Enforcement of 340B Statute Allowing Use of Community Pharmacies

Background: In 2010, the Health Resources and Services Administration (HRSA) issued guidance allowing 340B-covered entities to dispense discounted drugs through contract pharmacy arrangements. The purpose of this guidance was to allow covered entities to “more effectively utilize the 340B program and create wider patient access by having more inclusive arrangements in their communities ...” Ten years later, certain drug manufacturers attempted to restrict covered entities’ use of contract pharmacy arrangements and impose additional conditions on covered entities’ use of such arrangements. In December 2020, the AAMC and other organizations representing hospitals and hospital pharmacists filed a lawsuit against the HHS for its failure to enforce program requirements and to require that drug manufacturers honor discounts on drugs distributed through contract pharmacies. The HHS General Counsel subsequently issued an advisory opinion affirming that pharmaceutical manufacturers are obligated to deliver covered outpatient drugs to contract pharmacies and charge covered entities no more than the 340B ceiling price for those drugs. The AAMC and others have urged the HHS to impose civil monetary penalties on pharmaceutical manufacturers that are found to be in violation of this requirement.

In May 2021, HRSA sent letters to six drug manufacturers that have withheld 340B discounts on eligible drugs purchased by contract pharmacies informing them that they are in violation of 340B statute. The letter noted that HRSA may charge a penalty of up to $5,000 for each instance of overcharging. In response to receiving this letter, several of these manufacturers filed a lawsuit against the HHS to prevent the order from taking effect. Although the December 2020 lawsuit was dismissed, the AAMC and the other hospital associations have continued to participate as amici in cases filed against the HHS by drug manufacturers.

Latest Updates: The AAMC and four other hospital associations submitted four amicus briefs in support of the HHS enforcement actions against pharmaceutical companies that withhold 340B discounts by restricting covered entities’ use of community pharmacy arrangements. Amicus briefs were submitted in four cases:

1. Eli Lilly and Co. v. Becerra (filed in the U.S. Court of Appeals for the 7th Circuit).
2. AstraZeneca Pharmaceuticals LP v. HHS (filed in the U.S. Court of Appeals for the 3rd Circuit).
3. Novartis Pharmaceuticals Corp. v. Johnson; United Therapeutic Corp. v. Johnson (filed in the U.S. Court of Appeals for the District of Columbia Circuit).
4. Sanofi-Aventis U.S. LLC v. HHS; Novo Nordisk Inc. v. HHS (filed in the U.S. Court of Appeals for the 3rd Circuit).

July 1, 2022