340B Program Basics
The 340B program (Section 340B of the Public Health Service Act) requires drug manufacturers to provide discounted drugs to qualifying healthcare entities — hospitals, community health centers, and other safety-net providers. 340B prices are typically 25–50% below commercial prices. Qualifying entities can dispense 340B drugs to their patients — including patients covered by commercial insurance.
340B and Employer Plans
Employers do not directly participate in the 340B program — but their members may receive 340B drugs when they receive care at qualifying entities. When a 340B entity dispenses a drug to a commercially insured patient, the entity bills the commercial plan at the commercial rate — but pays the 340B price. The entity profits from the spread; the commercial plan pays the full commercial rate.
340B and Rebates
IQ Insight
340B drugs dispensed to employer plan members may not generate rebates for the plan. Manufacturers are not required to pay rebates on 340B drugs — and many do not. If your plan has significant utilization at 340B entities, your rebate revenue may be lower than expected. Analyze your claims data for 340B entity utilization and factor this into your rebate analysis.