It was 1992 when the federal government implemented what is known as the 340B Drug Discount Program. The program was designed to help certain types of healthcare providers, including hospitals, make better use of their financial resources to serve the uninsured and low-income population. Over the last 30+ years, the 340B program has exploded.
Some of the program’s astronomical growth has been attributed to the Affordable Care Act (ACA). There is good reason to suspect as much. Language in the ACA expanded eligibility by offering new ways healthcare providers could qualify as covered entities (CEs).
ACA mandates certainly did the trick. A mere 8,100 CEs participated in the 340B program in 2000. That number had jumped to 50,000 by 2020. The total volume of discount drug purchases under the program ballooned to some $44 billion in 2021. That is an increase of 16% over the previous year.
What Constitutes a Covered Entity
The 340B CE is a healthcare organization eligible to participate in the program by virtue of the fact that it provides services to Medicare and Medicaid patients. According to Ravin Consultants, a 340B compliance and implementation consulting firm, CEs are divided into seven categories:
- Health centers.
- Children’s hospitals.
- Disproportionate share hospitals (DSH).
- Freestanding cancer hospitals.
- Ryan White HIV/AIDS program providers.
- Rural referral centers (RRCs).
- Sole community hospitals.
Within the seven categories are plenty of possibilities. They include everything from non-profit hospitals to public health clinics to standalone emergency departments.
How the ACA Expanded the Program
Prior to implementation of the ACA, the guidelines defining 340B-eligible CEs were pretty narrow. But given that the main goal of the ACA was to give more people access to affordable healthcare, lawmakers expanded the definition of an eligible CE under 340B.
Under the expanded program, a healthcare provider must meet one of the following requirements to be 340B eligible:
- It must be owned or operated by a unit of state or local government; or
- It must be a public or private non-profit corporation with authority granted by a state or local government; or
- It must be a private, non-profit hospital with an active contract to provide healthcare services to uninsured and low-income individuals otherwise not entitled to Medicare or Medicaid benefits.
The last of the three provisions is really what opened the door to 340B. Virtually any healthcare provider can enter into a contract with HHS to provide the necessary services to low income and uninsured patients under Medicaid and Medicare. Once enrolled in the program, they can purchase certain prescription medications at discounted prices but still receive full Medicare or Medicaid reimbursement.
Free Money to Be Had
With the 340B expansion brought on by the ACA’s implementation, healthcare providers started signing up in droves. They were being offered ‘free’ money they were supposed to use to improve access to care among the poor and uninsured. But have they fulfilled that intention over the last 13 years?
The bigger question is whether the entire 340B program has met its intended goals over 30+ years of activity. Some say no while others say yes. Needless to say that the program remains a source of controversy among drug manufacturers, contract pharmacies, and healthcare providers.
Had it not been for the ACA, the 340B program may have never reached its current size. We will never know. What we do know is that 340B has outgrown its original estimates by a wide margin. It has gotten so big that it is almost unmanageable. Is it time to rein 340B in, or should Washington continue seeking to expand it?
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