Who is Eligible for 340B Pricing?

Sep 23, 2016 3:39:00 PM · by David Kushan

The 340B program offers discounts on outpatient drugs to certain safety-net covered entities that become certified and follow compliance guidelines. The program’s intent is to allow these entities to increase patient services by providing them with significant savings.

Once eligible, organizations are able to use the 340B price list to determine a ceiling price that caps the amount pharmaceutical companies can charge for select drugs. Signing up for the Prime Vendor Program (PVP) through Apexus allows organizations to purchase drugs below this ceiling. To put in perspective how big this program is, an estimated $6 billion was spent on 340B drug purchases last year alone.

So which organizations, patients, and drugs are eligible for 340B? Here’s a breakdown:

Organization Eligibility

Some organizations may not be aware that they qualify for 340B pricing, so it’s important to look at the specific requirements. Furthermore, with the recent expansion of Medicaid in over 30 states across the U.S., many organizations will see an increase in Medicaid patients, which increases their likelihood of eligibility under the disproportionate share rate criterion (see below).

Key institutional categories that often qualify are as follows:

Federal Grantees

  • Hemophilia Treatment Centers
  • Federally Qualified Health Centers/ Look A-likes
  • Ryan White Programs
  • Sexually Transmitted Disease/Tuberculosis
  • Title X Family Planning
  • Urban/ 638 Health Center
  • Native Hawaiian Health Centers


  • Disproportionate Share Hospitals
  • Critical Access Hospitals
  • Rural Referral Centers
  • Sole Community Hospitals
  • Children’s Hospitals
  • Free Standing Cancer Hospitals

A full list of qualified institutions can be found here.

In addition to being among these institutional categories, the organization must meet one of these legal definitions:

a)    owned or operated by a state or local government

b)   a private nonprofit hospital given “formally granted governmental powers” by the state or local government

c)    a private nonprofit hospital contracting with a state or local government to provide care to low-income individuals who are not eligible for Medicare or Medicaid

Finally, all hospitals (excluding critical access hospitals) must also meet a set adjustment percentage related to the amount of treatment of indigent patients. This disproportionate share hospital (DSH) adjustment percentage must be greater than 11.75 percent for disproportionate share, free-standing cancer, and children’s hospitals. It must be greater than or equal to 8 percent for rural referral center and sole community hospitals.  

This percentage is based on the number of low-income patients for which the hospital provides treatments. More information about this calculation, as well as the process of becoming a 340B health center can be found here.

Now that we looked at which organizations are eligible, let’s examine the requirements for patients and the drugs that are covered by the program.

Covered Patients

In order to be eligible, the patient must receive health care services other than drugs from the 340B covered entity (although a sole exception exists for patients that are part of an AIDS drug purchasing assistance program that has ties to the government). To meet this standard, the patient must have an established relationship with the 340B entity, which maintains records of that patient’s health care, and must be seen in an eligible location for the covered entity.

The patient must also receive health care services from a health care professional employed by the 340B entity or one who provides health care by an arrangement (such as a referral) in which the responsibility for care still rests with the 340B entity.

Finally, the patient must receive health care services that are consistent with the services of the 340B institution. If the patient meets all of these criteria, they qualify for the discounted pharmaceutical products.

Covered Drugs

For the eligible patients as described above, only certain outpatient drugs are eligible. These include FDA-approved prescription drugs, over-the-counter drugs written on a prescription, biological products that can be dispensed only by a prescription (vaccines excluded), or FDA-approved insulin. In all cases, drugs must be limited to outpatient use. For a full list of drug prices, consult a 340B price guide.

Once an organization determines if they are eligible for the programs and looks at the effect it will have on their pharmacy operations (in terms of which patients and drugs are covered), the challenge becomes how to go about implementing controls necessary for the 340B program compliance.

Learn everything you need to know about applying for the 340B discount drug program by downloading our white paper "How to Become a Federally Qualified 340B Health Center or Covered Entity".

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