Background  

Congress created the 340B Drug Pricing Program in 1992 under the Public Health Service Act to support safety-net hospitals and other providers that serve low-income, vulnerable patients. The 340B statute requires pharmaceutical manufacturers participating in Medicaid to sell outpatient drugs at discounted prices to not-for-profit and government-related health care organizations that care for many uninsured and low-income patients. According to the Minnesota Hospital Association, of Minnesota’s 143 hospitals, 95 participate in the 340B program. 

Who is Eligible for 340B Discounts? 

Hospitals:  

• Disproportionate Share (or DSH) hospitals  
• Certain Children’s Hospitals  
• Certain Cancer Hospitals  
• Rural Referral Centers  
• Sole Community Hospitals  
• Critical Access Hospitals 

Clinics and Centers: 

• Federally Qualified Health Centers (FQHCs) 
• FQHC Look-Alikes 
• Ryan White HIV/AIDS Clinics 
• Black Lung Clinics 
• Hemophilia Diagnostic Treatment Centers 
• Family Planning Clinics 
• Sexually Transmitted Disease Clinics 
• Tuberculosis Clinics 
• Tribal/Urban Indian Health Centers 
• Native Hawaiian Health Centers 

How does the 340B Drug Pricing Program help support hospitals? 

According to the Wisconsin Hospital Association, the 340B program has provided financial help to eligible health care organizations to manage rising prescription drug costs and preserve access to needed health care services in communities. 

Under the 340B program, pharmaceutical manufacturers participating in Medicaid are required to sell outpatient drugs at discounted prices to eligible health care organizations that care for a large percentage of uninsured and low-income patients.  

A patient’s health insurance status and income level does not affect an eligible health care organization’s ability to access 340B discounted medications. If eligible health care organization’s overall patient population meets the 340B requirements, discounts are available for all eligible outpatient drug purchases.  

The 340B program offsets Medicaid underpayments and exorbitant prices from pharmaceutical companies.  

340B-covered entities are provided access to lower costs of drugs to recognize the high levels of Medicare, Medicaid and indigent populations they serve. This includes dense urban areas – DSH hospitals – and remote rural areas – CAHs.  

How are 340B savings used? 

According to the Health Resources and Services Administration (HRSA), the federal agency responsible for administering the 340B program, enrolled hospitals, and other covered entities can achieve average savings of 25-50% on pharmaceutical purchases. Savings are used to support underfunded community services. Many rural hospitals report they use their 340B savings to keep their doors open. 

Threats to the 340B Pricing Program  

Starting in July of 2020, an increasing number of pharmaceutical manufacturers have unlawfully implemented restrictions on 340B. Restrictions have included increased data requirements, requirements for in-house or contract pharmacies, and increasing prices for 340B discount drugs above the rate of inflation. The 340B program has faced threats from pharmacy benefit managers (PBMs). According to the American Hospital Association, several of the largest drug manufacturers have unilaterally stopped providing discounts to 340B drugs dispensed through community and specialty pharmacies that contracted with 340B covered entities, violating the 340B statute.  

340B in Minnesota  

Legislators, stakeholders, and other covered entities continue to discuss what the future of 340B should look like in Minnesota. Specifically, how 340B data should be tracked and reported, and guidance and guidelines on how covered entities utilize their 340B savings. 

In the 2023 legislative session, Minnesota lawmakers passed new reporting requirements for 340B covered entities (Laws of Minnesota, Ch. 70, Article 16, Section 5, Subdivison 6). Beginning on April 1, 2024, covered entities such as Allina Health are required to begin reporting new data to MDH, including but not limited to:  

• The aggregated acquisition cost for prescription drugs obtained under the 340B program; 
• The aggregated payment amount received for drugs obtained under the 340B program and dispensed to patients; 
• The aggregated payment made to pharmacies under contract to dispense drugs obtained under the 340B program; and 
• The number of claims for prescription drugs described in clause (6) 

There are also discussions about imposing requirements for how covered entities utilize their 340B savings. Currently, at Allina Health, these savings help us provide financial assistance to patients, ensure access to critical services, and give back to our communities in exciting and meaningful ways through our Community Benefit and Engagement work. 

Seven Allina Health hospitals participate in the 340B program.  Allina Health continues to work with its partners and other stakeholders around the state to protect the 340B program and the benefits it provides to patients and communities across the state.  

Conclusion 

The 340B program allows hospitals to stretch limited federal resources to reduce the price of outpatient pharmaceuticals for patients and expand health services to the communities they serve. The 340B Drug Pricing Program is a key federal program that delivers millions of dollars in cost savings on medications that safety-net hospitals and other providers use to help vulnerable Minnesotans. Despite the success of the program, drug manufacturers want to scale back the program which would impede health systems ability to care for low-income and uninsured patients.