Public Health Service Section 340B

I. Introduction
This document provides basic information about the Public Health Service Section 340B Drug Pricing Program. Intentionally written in basic language, this article presents introductory information about the program and its purpose, background, and benefits. The Section 340B Drug Pricing Program has been beneficial for health care and pharmacy services. The intent of this article is to simplify the understanding the basic program.

II. Program Background
In 1992, Section 340B of the Public Health Service Act was enacted. Section 340B requires drug manufacturers to provide outpatient drugs to eligible health care centers, clinics, and hospitals (termed “covered entities”) at a reduced price. The 340B price is a “ceiling price”, meaning it is the highest price the covered entity would have to pay for select outpatient and over-the-counter drugs and minimum savings the manufacturer must provide. The 340B price is at least as low as the price that state Medicaid agencies currently pay. After notifying the Pharmacy Affairs Branch (PAB) of their intent to participate in the Section 340B program, covered entities can begin taking advantage of these low prices at the start of the next quarter. Each covered entity then determines how it will order and receive the low-priced drugs. They can do so by either contacting drug manufacturers directly or working with a wholesaler. Most entities find that working with a wholesaler not only simplifies the process, but also saves time and allows personnel to work on other projects.

To further simplify the process for obtaining the 340B drugs, the original legislation contained a special requirement that mandated the establishment of a “prime vendor”. A prime vendor is a single “preferred” wholesaler that specializes in serving covered entities in the 340B program. Benefits of the prime vendor program include:

  • Familiarity with subtleties of the Section 340B program
  • Value-added services
  • Sub-340B prices, due to negotiations with drug manufacturers using the collective purchasing volume of covered entities.

As a result, the Prime Vendor is able to provide high quality services and low drug prices for the benefit of the covered entities and their patients

III. Program Benefits
Participating entities have reported savings that range between 25-50% for covered outpatient drugs as a result of the low 340B prices. Using the prime vendor to receive prices even lower than the 340B ceiling price will further increase these savings. Covered entities currently using these programs indicate that they have improved healthcare delivery in their communities by using the savings to:

  • Reduce the price of medications for patients
  • Expand the number of drugs on formularies
  • Increase the number of indigent patients served
  • Expand other services offered to patients by the entity