340B Drug Pricing Program
A federal program requiring drug manufacturers to provide outpatient drugs at significantly reduced prices to qualifying safety-net healthcare providers.
The 340B Drug Pricing Program, established under Section 340B of the Public Health Service Act in 1992, requires pharmaceutical manufacturers participating in Medicaid to sell outpatient drugs at discounted prices to covered entities — safety-net providers such as disproportionate share hospitals, federally qualified health centers (FQHCs), Ryan White HIV/AIDS Program grantees, and other qualifying facilities. The program is intended to stretch scarce federal resources for low-income and underserved patient populations. Covered entities may purchase drugs at 340B prices (typically 25-50% below average wholesale price) and retain the difference between the acquisition cost and the reimbursement received from payers.
Program integrity is a central compliance concern. The Health Resources and Services Administration (HRSA), which oversees 340B, prohibits covered entities from diverting 340B drugs to patients who are not patients of the covered entity, and prohibits duplicate discounts — obtaining both a 340B discount and a Medicaid rebate on the same drug unit. Covered entities must maintain auditable records demonstrating that 340B purchases were dispensed to eligible patients, and HRSA conducts annual audits of covered entities and manufacturers. Violations can result in removal from the program, repayment of overcharges, and civil monetary penalties.
Contract pharmacy arrangements — where a covered entity contracts with an outside pharmacy to dispense 340B drugs — have become a major compliance challenge. Several manufacturers have restricted 340B pricing to covered entities that dispense drugs in-house, sparking litigation and HRSA enforcement actions. The legal landscape remains contested, with ongoing federal court decisions affecting how manufacturers may impose conditions on 340B pricing. Covered entities must track which manufacturers are imposing restrictions, maintain documentation of patient eligibility and drug dispensing, and adjust their contract pharmacy strategies accordingly.
Technology platforms supporting 340B compliance include split-billing software that identifies which prescription claims are 340B-eligible at the point of dispensing, accumulator and maximizer tools that track patient-level dispensing across retail and specialty pharmacy channels, and audit trail systems that generate HRSA-ready reports. Engineering teams building or integrating these platforms must handle pharmacy dispensing data feeds (NCPDP SCRIPT, 835/837 EDI transactions), real-time eligibility determination against the covered entity's patient definition, and manufacturer restriction rule engines that can be updated rapidly as the legal environment evolves.
Compliance-Native Architecture Guide
Design principles and a structured checklist for building software that is compliant by default — not compliant by retrofit. Covers data architecture, access controls, audit trails, and vendor due diligence.