Southwest Consulting Associates Blog

340B Corner: The 340B Program History

Posted by Tanya Frederick on Jul 1, 2015 12:29:40 PM

Find me on:

340B Program HistoryAmidst the controversy surrounding the 340B program, let’s take a step back with a little history of the 340B Drug Pricing Program to understand how we got where we are today.  The 340B program was created as part of the Veteran Affairs Act in 1992 and requires pharmaceutical manufacturers that participate in Medicaid to provide discounted prices on covered outpatient drugs to healthcare facilities that serve vulnerable patient populations.  Facilities must meet specific criteria to enroll in the 340B Program and become a “Covered Entity”. Covered entities must abide by program requirements which come from a combination of 340B statute, Federal Register notices, HRSA* policy releases and ‘frequently asked questions’ (FAQ) guidance published on the HRSA website or face savings paybacks and/or potential removal from the program.


340B Program History Continued 

While the program has been around for two decades, things became interesting in 2010 when The Patient Protection and Affordable Care Act (ACA) broadened the scope of healthcare facilities that could participate in the program provided they meet the program eligibility requirements.  ACA included:

·         Critical Access Hospitals (CAH)

·         Sole Community Hospitals (SCH)

·         Rural Referral Centers (RRC)

·         Free-Standing Cancer Hospitals (CAN)

The Act also added additional program integrity measures for covered entities as well as manufacturers.

With the full impact of this legislation unclear, the program came under considerable scrutiny from the pharmaceutical industry and subsequently Congress, questioning whether covered entities were in compliance with all program requirements (see SCA’s white paper).  As a result, in 2012, HRSA started exercising their authority to audit covered entities for compliance with program requirements. Unfortunately, many of the program requirements are not clear and are left up to interpretation.  In the near future, we expect guidance or more commonly called “Mega-Guidance”, to be published in the Federal Register for public comments.  It is anticipated that the “Mega-Guidance” will provide clarity on a wide range of 340B issues.


The 340B Drug Discount Program is a lifesaver for many facilities.  In fact, that is exactly what was intended.  The intent of the 340B Program is to enable covered entities “to stretch scarce Federal resources as far as possible, reaching more eligible patients and providing more comprehensive services.”[1]  The resulting savings allows for greater reinvestment in charity care and enables covered entities to continue to provide services that otherwise would be eliminated due to lack of resources.


The proverb “It Takes a Village” may have never been more appropriately applied than with navigating the challenges of 340B. It takes both internal and external resources to meet the requirements for the program.  At the core, you have to look at the 340B program as you would any compliance audit. Using a team approach, developing policies and procedures, maintaining auditable records, preserving program integrity, conducting internal monitoring, providing ongoing education, responding promptly to offenses and developing corrective action all play their roles in 340B compliance and collectively, make for a more manageable 340B compliance review. We will continue to share information and be a resource as we work with clients through audits and assess the impact of the greatly anticipated “Mega-Guidance” release. The journey continues…



*The Office of Pharmacy Affairs (OPA) of the Health Resources and Services Administration (HRSA) is an agency within the Department of Health and Human Services that oversees the 340B Program.  The program was created through bipartisan legislation signed into law by President George H.W. Bush in 1992. Veterans Health Care Act of 1992, Pub. L. No. 102-585, § 602, 106 Stat.4943, 4967-71, codified at 42 U.S.C. § 256b.

[1] H.R. Rep. No. 102-384(II), at 12 (1992)


                      340B Drug Pricing Program White Paper            

Topics: 340B

About This Blog

The climate of provider reimbursement is ever-changing and this blog is intended to keep you up-to-date on the latest information regarding:

  • DSH Reimbursement
  • 340B Pharmacy Drug Discount Program
  • Compliance Issues
  • Litigation Surrounding Provider Reimbursement

Subscribe to Email Updates

Follow Us

Recent Posts