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What Is Medicare 340B?

Public and nonprofit healthcare facilities often treat individuals who are under-insured or lack the means to obtain insurance. These facilities are eligible for financial assistance for medication costs through the 340B Drug Discount Program. Medicare recipients with limited income and resources can benefit from the discounts afforded through the 340B program.

  1. 340B Drug Discount Program

    • The U.S. Congress authorized the 340B Drug Discount Program in 1992 as part of the Veterans Health Care Act. It was designed as a way to help reduce medication costs for needy people. The program works by reducing prescription and prescribed over-the-counter drug costs for low income and under-insured Medicare and Medicaid recipients, according to the Safety Net Hospitals for Pharmaceutical Access reference website. In effect, the 340B Drug Discount Program requires pharmaceutical manufacturers to offer discounted prices to government-supported facilities such as community health centers, nonprofit hospitals and Title X family planning clinics.

    340B Prime Vendor Program

    • The U.S. Health Resources and Services Administration set up the 340B Prime Vendor Program to coordinate drug pricing rates between pharmaceutical companies and the government-sponsored facilities that benefit from the 340B Drug Discount Program. According to the Health Resources and Services Administration, the program consists of prime vendors, or preferred wholesalers who contract with multiple pharmaceutical companies and pharmacy businesses to form a network of distribution points for eligible government-sponsored facilities. Through this program, eligible facilities can receive discount prices because of the collective purchasing power created by the large number of participating facilities.

    Drug Pricing

    • Section 340B of the Veterans Health Care Act makes up one section of the Public Health Service Act, also established in 1992, according to the OLR Research Report. As a result, the 340B Drug Discount Program also goes by the name of PHS Pricing. In effect, the 340B price is actually a ceiling price that sets the limit on how much a government-sponsored facility would have to pay when enrolled in the program. The discount offered to government-sponsored facilities is around 50 percent of the average wholesale price charged by drug manufacturers; however, facilities may have the option of negotiating lower prices with manufacturers.

    Eligible Patients and Pharmacies

    • In order to benefit from the Medicare 340B program, patients and pharmacies must meet certain eligibility criteria. According to the Georgia Pharmacy Association, discount prescription rates only apply to patients being treated on an outpatient basis by a government-sponsored facility. The facility must also act as a patient's primary healthcare provider, meaning a particular hospital or clinic services the patient on an ongoing basis. In order for a pharmacy to participate in the 340B program, it must have an assigned Medicare provider number and hold a federal grant status. Only pharmacies that work in conjunction with government-sponsored facilities are eligible for the program.

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