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340B program: Opportunities for community pharmacy involvement

Ned Milenkovich, PharmD, JD
Many pharmacies are aware of the 340B Drug Pricing Program, but few understand the mechanics of how such a program works and to what extent a community pharmacy may be able to capitalize on its benefits.

The 340B Drug Pricing Program resulted from enactment of Public Law 102-585, the Veterans Health Care Act of 1992, which is codified as Section 340B of the Public Health Service Act. The 340B Drug Discount Program is managed by the Health Resources and Services Administration (HRSA) Office of Pharmacy Affairs (OPA).

Covered entities

Section 340B limits the cost of covered outpatient drugs to certain federal grantees, federally qualified health center look-alikes, and qualified disproportionate share hospitals, and are typically called "covered entities." Under the Obama administration's healthcare reform bill, the definition has been expanded to include additional types of covered entities.

Participation in the 340B program results in significant savings estimated to be 20% to 50% of the cost of pharmaceuticals. The purpose of the 340B program is to enable these covered entities to stretch scarce federal resources, reaching more eligible patients and providing more comprehensive services to them.

Provision of service

Typically, pharmacy services provided by a 340B-covered entity may be provided either through an "in-house" pharmacy or through contract with an outside pharmacy, including a community pharmacy. In other words, community pharmacies are able to contract with 340B-covered entities and to deliver prescription medication to qualified patients. In that regard, a community pharmacy might provide real value to a patient seeking access to prescription medication and also add an income stream to its existing business model.

Prescription price

There may be some variation among 340B-covered entities, but in general the total prescription price may be divided into 2 parts. The first part includes the cost of the drug, and the second part includes the 340B covered-entity administrative fee.

When contracting with a pharmacy, the 340B-covered entity typically pays the pharmacy a professional pharmacy services fee. The fee for these services is usually paid to cover the pharmacy cost of dispensing, drug utilization review, drug interaction identification, allergy screenings, and other cognitive services offered by a community pharmacy before it dispenses a prescription drug. In general, fees paid to a contract pharmacy range between $9-$12 per prescription with some variation.


The contract between the 340B-covered entity and the contract pharmacy or pharmacies is required to include those elements outlined in the "Multiple Contract Pharmacy Services Guidelines" and may be found at the HRSA website. Note that OPA will not review contracts and strongly recommends that 340B-covered entities and pharmacies engage their legal counsel in order to review all contracts or other legal documents to ensure that all federal, state, and local requirements are met.


The Multiple Contract Pharmacy Services Guidelines outline the responsibilities of covered entities and contract pharmacies. Along with contract pharmacies, covered entities are responsible for ensuring compliance with all 340B requirements to prevent diversion and duplicate discounts. Some highlights:

  • Both the 340B-covered entity and the contract pharmacy must agree that they will not resell or transfer a 340B drug to any party but the 340B-covered entity's patients.
  • Both must also establish an arrangement with the state Medicaid agency to prevent duplicate discounts.
  • Both the 340B-covered entity and contract pharmacies must adhere to all federal, state, and local laws.

To ensure that drug manufacturers and wholesalers recognize contract pharmacy arrangements, 340B-covered entities electing to use a contract pharmacy or pharmacies are required to submit to OPA the Contract Pharmacy Registration Form and relevant addendum for each contract.

In general, the 340B program provides an opportunity for community pharmacies to provide additional access to specific patients who are in need of discounted prescription drugs. It also gives the community pharmacy an opportunity to add a revenue stream to its existing business model and enables it to become further involved with patient care.

Ned Milenkovich is a member at McDonald Hopkins, LLC, and chairs its Drug and Pharmacy Practice Group. He is also a member of the Illinois State Board of Pharmacy. Contact him at 312-642-1480 or at

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