Your health system can optimize the benefits of a well-run 340B program if it is equipped with the right information, personnel, technology and program partners. Those benefits include you’ll generate and the ability those savings will give you to maximize your mission.
The 340B drug pricing program was created by Congress in 1992 to provide certain healthcare providers significant discounts on prescription drugs. These are healthcare providers that serve uninsured or underinsured populations. The program allows eligible hospitals, clinics, pharmacies, nursing homes, home healthcare agencies, hospices, dialysis centers, and long-term acute care facilities (among others) to replenish prescription inventories at prices far below market rates.
The purpose of 340B programs is to enable eligible providers to create higher margins on prescriptions as a way to fill revenue gaps that are inherent to their business models and patient populations.
The 340B program covers thousands of prescription medications. Many of the hospitals that take advantage of the program’s discounts save millions of dollars a year on their prescription costs. This can be savings and revenue which, for some of the hospitals VytlOne serves, make the difference between meeting their budget or falling short. .
If this is the case, then why don’t all 340B-eligible hospitals and health systems take advantage of their legal rights to the program’s savings and discounts? In our experience, the primary reason in most cases is fear of the consequences of non-compliance along with a lack of administrative bandwidth to effectively develop and administer 340B programs.
This guide can help. We give eligible entities information on how to:
When a patient receives a 340B-eligible prescription from an eligible entity, the entity is reimbursed for the full market price of the drugs, but pays only a fraction of the drugs’ cost — by replenishing the medication from the 340B catalog. Learn more about what the 340B Program is.
Manufacturers bear the burden of the cost and reimburse wholesalers for 340B discounts on 340B-eligible medications.
As a covered entity, you send your encounter (visit) data to your TPA, and your pharmacy sends the TPA the prescription data. Your TPA creates a match when it determines that 340B qualification criteria has been met, and your pharmacy then orders from your 340B account to replenish the drugs.
Clients served by VytlOne use a proprietary software system, which monitors every prescription their organizations fill, and identifies every eligible prescription generating sufficient savings to justify the time and effort to claim 340B savings. This extra layer of monitoring improves compliance, while hunting-down hidden opportunities for more 340B savings.
VytlOne works with each client to determine how aggressively they want to pursue 340B savings. We then maintain comprehensive records on every prescription applied for — always assuring clients of complete compliance.
340B-eligible hospitals can use the in-house (or on-campus) retail pharmacies they own and manage, as well as “contract pharmacies” — which can be both on-campus and off.
Covered entities often choose contract pharmacies to dispense 340B drugs to patients for a number of reasons. Many hospitals, for instance, prefer their on-campus retail pharmacies to be operated independently. Some hospitals reach contract pharmacy agreements with multiple pharmacies in their communities, offering their patients more convenience, access and options when filling prescriptions written by their providers.
In order for hospitals to qualify for the 340B program, they must meet the three 340 program requirements below — unless they are Rural Hospitals; in which case, they must meet only the first two requirements.
While the eligibility framework for the 340B program is clearly defined by HRSA, applying those requirements operationally can become more complex across large health systems, multi-site organizations, and expanding outpatient networks. Many covered entities must continuously evaluate provider relationships, patient eligibility criteria, reimbursement structures, and site registration requirements to help support ongoing compliance.
Free-standing children’s hospitals and free-standing cancer hospitals must have a payer mix that gives them a DSH percentage of greater than 11.75 percent.
Critical Access Hospitals do not have a DSH adjustment percentage requirement.
NOTE: A hospital’s DSH adjustment depends on the number of inpatient days of its Medicaid and Supplemental Security Income (SSI) patients.
Yes. OPA requires that a covered entity register, as child sites, all offsite clinics, departments and services where 340B drugs are purchased or used, whether or not they are in the entity’s primary campus.
“Offsite” generally means a location has a separate physical address than the hospital parent site. A hospital does not need to register outpatient clinics, departments or services located within the entity’s main hospital — but may do so if they appear on a reimbursable line of a hospital’s most recently-filed cost report.
Applicable hospitals should ensure that their policies and procedures address qualification of 340B drugs dispensed at Child Sites for services not yet included in the most recently filed Medicare cost report, based on whether those locations meet Medicare provider-based requirements, whether the 340B covered entity maintains the responsibility and records of the patient’s care, and whether the health care professionals prescribing 340B drugs have relationship with the 340B covered entity.Covered entities can dispense 340B-eligible prescriptions to patients who (1) Have established relationships with the covered entity, such that the entity maintains records of the patient’s care; (2) Receive care from a professional employed by the covered entity, or under contract or other arrangements (e.g., referral for consultation) with the covered entity, such that responsibility for the care remains with the covered entity; and (3) Receive health services from the covered entity that are consistent with the services for which grant funding has been provided to the entity.
Under these guidelines, an individual is not considered a covered entity’s patient if the only health care service received by the patient from the entity is the dispensing of a drug for subsequent self-administration — or administration in the home setting. Patient eligibility remains one of the most closely monitored areas within the 340B program because eligibility determinations often depend on consistent documentation, provider relationships, encounter classification, and accurate alignment between operational systems. As healthcare organizations grow, maintaining visibility across these processes can become increasingly important to supporting compliance and reducing diversion risk.In general, 340B eligibility involves both prescription medications and the covered entity writing the prescriptions. Here’s a simple checklist for determining whether drugs are eligible for 340B.
Eligible drugs frequently NOT submitted for 340B savings
For the following covered entities, 340B-covered drugs do not include any drugs designated by the Secretary under Section 526 of the Federal Food, Drug, and Cosmetic Act for rare diseases and conditions:
For the health systems VytlOne serves, we pursue a policy of optimizing 340B savings that’s both aggressive and conservative. In other words, we believe you should aggressively pursue 340B savings for every prescription that’s worth pursuing. As we intimated earlier, some prescriptions are simply too low-cost, at market rates, to justify the effort needed to generate nominal savings.
Ideally optimized 340B programs generate a net savings on every eligible prescription claimed.
In our experience, 340B programs can’t be optimized without using proprietary software that keeps detailed electronic records on every prescription that hospitals’ outpatient pharmacies (and contract pharmacies) fill, and enables them to easily and instantly produce all the evidence they would ever need to respond to audit requests.
Whether 340B programs are managed entirely in-house, or they use outsourced partners for support, they should be managed by people with the skillsets — and, ideally, the track records — to ensure that compliance at all times. It’s worth noting that, since 2013, VytlOne has optimized dozens of 340B programs, and not once has a hospital we serve ever been fined for a 340B violation.
VytlOne’s proprietary software not only identifies current and past reimbursable prescriptions for our new clients, it automatically applies for those reimbursements. Typically, we’ll mine new clients’ prescriptions written up to one year prior to the date we started our service for them.
Contract pharmacies are critically important for optimizing the savings and revenue that your health system can generate with well-managed 340B programs. They’re also an important extension of your overall care of, and for, your outpatients. Increasing the number of independent pharmacies serving as contract pharmacies enhances your ability to offer your outpatients options and convenience in filing their prescriptions.
While you can’t steer patients toward specific pharmacies, you can certainly make your patients aware of the options available to them. Which is why maximizing the number of 340B contract pharmacies in a network should also maximize prescription-replenishment savings and revenue for eligible hospitals; at least in theory. In practice, we’ve found that to be far from the case.
In addition to the locational convenience health systems offer their outpatients by having multiple off-site pharmacies, many prefer their on-campus retail pharmacies to be independently owned and operated.
At the same time, community pharmacies need incentives to serve as contract pharmacies — and that’s where the problem lies with many contract pharmacy relationships.
Some contract pharmacies cost hospitals more (in fees) than they generate in 340B savings and revenue. What’s more, it’s often not for lack of prescription volume, but rather because those pharmacies simply won’t qualify many 340B-eligible medications. The other problem with many contract pharmacies is that they’re located too far from hospitals, and their patients, to offer them convenience in refilling their prescriptions.
We recognize that the goal of serving a community’s needs (even at a loss) often outweighs your hospital’s objective of maintaining only net-positive 340B contract pharmacy relationships. At the same time, we’ve helped a significant number of health systems replace contract pharmacies with low 340B match rates, with nearby pharmacies that have much higher match rates — generating far better 340B savings for those hospitals.
Covered entities often evaluate several operational and financial factors when building or expanding their contract pharmacy networks. These considerations may include pharmacy fee structures, TPA compatibility, reimbursement workflows, manufacturer restrictions, specialty pharmacy capabilities, and the geographic accessibility of participating pharmacies for patients.
Because contract pharmacy performance can vary significantly from one relationship to another, many organizations monitor both operational alignment and net program performance across their networks over time. In some cases, hospitals may prioritize pharmacies with stronger participation rates, higher replenishment alignment, or closer proximity to the patients they serve.
As manufacturer restrictions, specialty drug utilization, and reimbursement environments continue to evolve, many covered entities regularly reevaluate their contract pharmacy strategies to help support both compliance and long-term program sustainability.
The answer is complicated. And it typically applies on a market-by-market basis. In our experience, here are three primary situations you should avoid:
At the same time, hospitals can compromise the potential of their 340B programs by setting Dispensing fees set too low — which lowers local pharmacies’ incentive to partner with you in the program. The time-honored business aphorism applies: In order for your contract pharmacy relationships to reach their full potential, your agreements have to create Win-Win situations for both parties.
In order to maintain 340B compliance, your health system is required to provide oversight of all contract pharmacies — while maintaining auditable records. You’re also expected to conduct annual audits of your contract pharmacies. Audits which should be completed by an independent auditing firm.
That said, when you authorize VytlOne to manage and/or oversee your contract pharmacy agreements, we’ll give you complete support in maintaining auditable records, and conducting your annual audits.
Specialty drugs, which Medicare defined (in 2019) as any drug costing more than $670 monthly, constituted about 50% of the overall prescription drug market’s expenditures (some $161 billion) in 2020. That’s a 29% increase of total expenditures over 2015. What’s more, according to Acentrus Specialty, 8 out of every 10 new drugs approved by the FDA in 2020 were specialty drugs. All of which makes specialty drugs the fastest-growing, and largest part, of the prescription-drug market.
According to the estimates of several online sources, the average retail pharmacy prescription in 2020 cost $566 per month — while the average specialty drug prescription cost $6,565. AARP estimated, in a September 2021 article, that —in 2020 — the average annual cost for a single specialty medication used on a chronic basis was $84,442.
Fewer claims means less exposure to potential audits and compliance claims. What’s more, most specialty pharmacies have dozens, even hundreds, of 340B contract pharmacy relationships; which means that they’re highly experienced, and educated, in maintaining 340B compliance for the covered entities they serve.
On a purely practical level, a well-managed bedside prescription delivery program can improve your health system’s pharmacy revenue.
On the human level, Meds To Beds is more than a tangible sign of your system’s care of, and for, the individuals & families you treat. It’s your first line of offense in ensuring that your patients follow the prescription protocols you’ve given them — significantly decreasing the likelihood of their readmission while, in the process, improving your patient’s satisfaction ratings.
In general, health systems fail to implement Bedside Prescription Delivery programs because of the costs of staffing and administrations. In our experience, managing dozens of Meds to Beds programs, those costs are more than offset by the revenues generated. In one Mississippi health system alone, VytlOne filled over 18,000 outpatient prescriptions in just 12 months. During that time, the health system’s pharmacy revenues increased 125%, while its readmissions decreased 79%.
First, your health system’s retail pharmacy staff must commit to partner with your case management teams, nurses and physicians to implement a cohesive medication treatment plan for your patients who are transitioning back to their lives at home. That commitment means your pharmacy staff must be willing to perform the work necessary to enhance your health system’s current efforts, ensuring that there is never any additional burden placed on your hospital’s providers, nurses and staff.
Next, when prescriptions are delivered bedside to discharging patients, you should be sure to have a pharmacist available to help patients —reviewing both prescription protocols and any issues that could compromise your patients’ willingness (or ability) to maintain compliance with their prescriptions after they leave the hospital.
Once a patients accepts his or her prescriptions, and understands how to maintain compliance, your meds to beds program should pass-off the job of continued patient contact to a readmission risk reduction program.
Bedside prescription delivery is arguably the most effective method for ensuring that your patients’ prescriptions are captured before they leave your care.
Put another way, your Meds To Beds program should not only support health systems’ mission of maximizing patient care, compliance and satisfaction while minimizing readmissions, it should serve as a funnel for directing patients into 340B programs. This role is particularly significant, when you consider the aggressive efforts manufacturers have undertaken to minimize the number of pharmacies that 340B-eligible hospitals can utilize in their 340B programs.
Many manufacturers have launched initiatives to limit their support of eligible entities’ contract pharmacies to one per hospital. They’ve also fought HRSA’s efforts to overturn those limits, through protracted legal battles. It goes without saying, those manufacturers have determined that legal battles are less costly to them than upholding their legal obligation to support 340B drug discounting.
Patients entered into your 340B program “funnel” generally receive superior ongoing professional care and support, after they are discharges. And as we’ve mentioned elsewhere, hospitals with multiple contract pharmacies in their networks offer patients more choices, and convenience, in filling their prescriptions.
Statistical research conclusively demonstrates that two primary factors driving patient non-compliance are lack of education and understanding, and lack of access (both in terms of financial means and proximity) to pharmacies. Which is why many hospitals with 340B programs supplement their Meds To Beds programs by offering home delivery and prescription discounts to financially-challenged patients. Those health systems generally agree that the costs of additional patient support are more than offset by the benefits of superior post-discharge care — not to mention the savings that come with reducing readmissions.
According to a 2020 study published by Frontiers In Public Health, Meds To Beds programs have been shown to significantly reduce 30-day hospital readmissions — particularly among older adult patients.
TPAs play a critical role in 340B programs. It’s their job to “match” prescription claims from your contract pharmacies with patient data hospitals provide, and then to determine the eligibility of those claims. Without a match, a prescription cannot be qualified for 340B eligibility and savings.
Your TPAs’ ability to accurately qualify your 340B claims is only as reliable as the information you provide. Their systems simply aren’t configured to monitor and spot mismatches in that data.
One of the most common reasons 340B claims are misqualified — particularly with Medicare patients — is inconsistency in Date Of Birth entries. Patient Name mismatches is another common cause of misqualifications. For instance, you may have a patient registered as Bob in your pharmacy system and Robert on your hospital’s system.
That said, the more complex 340B programs are, the higher the likelihood that their automated data submission process will be flawed. Which will naturally lead to missing EHR encounters and missed 340B savings opportunities — quite possibly substantial savings opportunities.
The process of monitoring 340B programs is especially difficult when multiple TPAs are involved. Every TPA’s proprietary software system’s interface is unique. Making matters even more complicated, the reporting structure within TPA portals vary significantly from one to another. We’ve found that health system 340B personnel often spend an inordinate amount of time simply trying to access the information that they need — which leaves them far too little time to proactively take advantage of that information.
Mismatch rates vary from health system to health system, but we can say this with confidence: If you have a 340B program already in place, it’s probably a lot higher than you think.
One of the health systems VytlOne serves employs three experienced and well-trained full-time professionals — who monitor their system’s 340B claims on a full-time basis. And yet, during the first six weeks VytlOne supported their efforts, we provided matching justification for, and generated $187,000 worth of, 340B savings that they’d overlooked.S
As we noted in a previous post, the number one reason eligible hospitals don’t take advantage of their legal right to participate in the 340B program is lack of administrative bandwidth to ensure full compliance.
340B is complicated. That’s why so many covered entities have full-time employees monitoring their 340B programs. At the same time, for the clients whose 340B programs we manage, VytlOne performs all the duties of a dedicated full-time employee — and more.
Managing 340B compliance often requires coordination across pharmacy operations, split-billing systems, provider eligibility files, contract pharmacy relationships, finance teams, and clinical workflows. As programs grow, maintaining visibility across all of these operational areas becomes increasingly important to supporting long-term compliance and program stability.
Even organizations with established oversight processes may encounter challenges related to data consistency, workflow alignment, and maintaining accurate eligibility determinations across multiple systems and care settings.
This final point is worth repeating: Routine self-audits are critical to ensuring your program’s compliance.
For many covered entities, audit readiness involves more than periodic reviews. Effective compliance oversight often includes ongoing monitoring processes, clearly documented workflows, regular policy reviews, and coordination between pharmacy, compliance, finance, and operational leadership teams.
Organizations that take a proactive approach to internal oversight are often better positioned to identify operational inconsistencies early and maintain long-term program integrity.
When you register your health system for the 340B program, you’ll be asked to choose whether you’ll Carve-In or Carve-Out Medicaid fee-for-service (FFS). This decision will apply to all of your Medicaid FFS patients. Choosing Carve-In means that you’ll be using 340B-priced medications with your Medicaid FFS patients. Choosing Carve-Out means you will not use 340B-priced medications with your Medicaid FFS patients.
The 340B program does not allow you to take advantage of 340B discounts and Medicaid drug rebates for the same drugs. That’s the practice known as Double Dipping, and as a covered entity, you need to maintain compliance mechanisms that prevent duplicate discounts.
Preventing duplicate discounts can become increasingly complex when multiple reimbursement systems, contract pharmacy arrangements, and payer workflows are involved. Because of this, many covered entities implement ongoing monitoring and validation processes to help support accurate billing alignment and reduce compliance risk over time.
If you decide to Carve-In Medicaid fee-for-service, you’ll be required to list each Medicaid state where plan to bill, as well as the corresponding billing number(s) you’ll list on your bills to those states. It follows, then, that you shouldn’t list any Medicaid states where you plan to carve-out.
On average, HRSA conducts roughly 200 340B audits every year. Moreover, by law, manufacturers are legally entitled to audit covered entities, 1) to verify their compliance with patient definitions, and 2) to prevent duplicate discounts. However, manufacturer audits require HRSA approval, which is why they are extremely rare.
Many organizations approach 340B compliance as an ongoing operational discipline rather than a one-time implementation effort. As regulatory expectations, contract pharmacy arrangements, and reimbursement environments continue to evolve, maintaining consistent oversight and process accountability becomes increasingly important.
You are required to notify any impacted manufacturers and offer steps to resolve issues directly with them and their wholesalers. You’ll also need to send the HRSA Office of Pharmacy Affairs a written reports of any compliance issues.
According to its website, “340B ESP allows 340B covered entities and pharmaceutical manufacturers to work collaboratively to resolve duplicate discounts.” In truth, the “service” is a brazen, unlawful ploy by drug manufacturers to evade the prescription-replenishment discounts they are legally required to offer eligible entities — by placing extraordinary reporting burdens on hospitals submitting claims for 340B savings.
We believe the key factor that led to 340B ESP is the extensive range of commercial rebates the manufacturers themselves have voluntarily extended to PBMs — rebates which, in total, far exceed the combined discounts extended to 340B-eligible hospitals and health systems. In short, it’s a situation of their own making.
The 1400-member 340B advocacy group 340B Health notes that “claims data and other information submitted through the 340B ESP platform could be used by the Berkeley Research Group (BRG), the entity behind Second Sight Solutions [which owns 340B ESP], for research and analytics. BRG has published a number of negative reports on 340B in the past that have been funded by [the trade association formerly known as the Pharmaceutical Manufacturers Association].”
In short, there is a very real possibility that BRG could be using 340B pricing claims data submitted to 340B ESP to undermine the very entities it purports to be “serving.”
In unedited form, 340B ESP’s Terms Of Use runs 5798 words in length. Based on the average adult’s speed in reading technical documents (62.5 words per minute), that means 340B ESP’s terms of use alone will take the average reader nearly 93 minutes to complete. That estimate, of course, constitutes a fraction of the time it would take most health systems’ 340B-reporting employees to read and fully comprehend the terms.
###
The Covered Entity Platform is subject to modification (including addition, alteration, or deletion) by Second Sight in its sole discretion.
###
Upon termination…Second Sight shall have no obligation to return to you any data stored on Second Sight’s systems.
###
You expressly acknowledge and agree that the Participating Pharmaceutical Manufacturers are third party beneficiaries of these Terms and have the full rights to enforce these Terms as if any one of them was a signatory hereto.
###
Second Sight may revise these Terms from time to time by posting such revised Terms on this website, or otherwise notifying you in advance of making effective such revisions to the Terms. Such revised Terms shall be effective to you upon the effective date provided in the posting or other notice, unless otherwise explicitly stated by Second Sight. It is your responsibility to be aware of any such revised terms by checking and reading these Terms from time to time and your notices.
THE LIMITATIONS OF LIABILITY SHALL NOT APPLY TO SECOND SIGHT’S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. SECOND SIGHT’S AGGREGATE LIABILITY FOR DIRECT DAMAGES UNDER THIS AGREEMENT WILL NOT EXCEED ONE HUNDRED DOLLARS ($100).
Under the requirements set down by Drug Manufacturers, 340B-eligible entities must report, twice monthly through the 340B ESP platform, their covered prescriptions from every TPA with whom they work.
Extracting covered prescription data from some TPAs is impossible, given the lack of available 340B pricing in the 340B wholesaler account. Moreover, it’s pointless to assume that covered entities and their contract pharmacies will regain access to their 340B discounts — since some manufacturers have placed 45-day time-frame restrictions from the dispensing of the prescription to replenishment. Why? They know that covered entities won’t be able to meet this requirement.
How effective has 340B ESP been in enabling drug manufacturers to evade their legal obligations? In the first year of its relationship with 340B ESP, Merck alone saved $2 billion. Worse still, at last count, 18 manufacturers are now requiring eligible health systems to report to 340B ESP.
If you choose to report claims data to 340B ESP, we’ll report on your behalf. Then we’ll track 340B price reinstatement — by manufacturer, and by contract pharmacy. We’ll also verify 340B price availability for each manufacturer, in each wholesaler account, for each of your contract pharmacies. Once verified pricing has been restored along the entire chain, we’ll work with your TPAs to “turn-on” replenishment — and ensure they replenish appropriately.
There are many places where communication-failure can and does occur — which is why we communicate with manufacturers, 340B ESP and wholesalers on your behalf. After that, we fight for reinstatement of the prices to which you’re entitled under the 340B statute.
Never upload more data than is absolutely necessary, and required, by 340B ESP. We submit the NDCs only from the manufacturers imposing restrictions on 340B pricing contingent on data reporting.
Don’t ever assume 340B prices are restored in your contract pharmacies’ 340B wholesaler accounts by the 10-day post-submission mark (the time frame 340B ESP says to allow).
If any manufacturer working with 340B ESP decides, unilaterally, that the purchases made for any of your contract pharmacies are more than the dispenses, they’ll refuse to pay the wholesaler’s chargeback. Which will result in a credit-rebill — which results in you, the covered entity, paying WAC — which is a much higher price.
Eligible 340B dispenses often do not occur in full-package-size increments. It may take months, and multiple claims, to equal a full reorderable package size — but some manufacturers won’t reimburse 340B purchases past 45 or 60 days from dispense. Which means covered entities will likely never be able to get many of the 340B prices they are entitled to.
When you submit your own reporting to 340B ESP, you can’t simply pull reports, verbatim, from your TPAs and upload them. Your uploads must be submitted in a highly-specified format, and every upload is fraught with potential pitfalls that can cause failures.
The good news about 340B ESP, for covered entities
Despite 340B ESP and manufacturer restrictions, VytlOne continues to produce results for health systems. Altogether, our efforts have generated more than $500 million in savings and revenue for the 340B programs we optimize.
VytlOne is here to help, if you have questions.
There are so many ways to optimize your 340B savings and revenue, while overcoming 340B ESP and manufacturer restrictions. For more information, contact Howard Hall. C: 214.808.2700 | [email protected]
There’s an old saying that it’s better to be rich and guilty than poor and innocent. It’s a sad truth that accurately reflects the current state of 340B manufacturer restrictions, particularly in the wake of the January 30, 2023 decision by the U.S. Court of Appeals for the Third Circuit — which was largely in favor of three drug companies that have imposed harmful limits on safety-net hospitals’ access to 340B drug pricing program discounts.
Novartis was the first drug manufacturer to limit 340B-eligible contract pharmacies to those located within 40 miles of the covered entity will have pricing added. On the surface, this doesn’t seem particularly problematic. After all, most, if not all, of a typical 340B-eligible health system’s retail contract pharmacies — from chains to local independents — will still get 340B pricing. The problem with the 40-mile radius, and Novartis knows this, has to do with covered entities’ specialty pharmacy networks.
The number of specialty pharmacies across the country is significantly lower than the number of retail pharmacies — and a significant percentage of those pharmacies serving 340B-eligible entities are located outside that 40-mile radius.
On top of that, there’s the difficulty of 1) getting PBMs to allow pharmacies to dispense for their patients — other than the pharmacies health systems own — and 2) getting manufacturers to allow purchase of their specialty meds.
On February 15, 2023, one of the clients we serve forwarded us a 10-page, 3914-word letter they’d received from Johnson & Johnson. After they’d spent who-knows-how-many-hours poring over the contents, their email included one genuinely troubled question: “Does this mean what we think it means?”
The key restriction to which they were referring (which Johnson & Johnson announced would go into effect starting March 7, 2023) was as follows:
If a non-grantee Covered Entity does not have an in-house pharmacy, such Covered Entity may designate a single contract pharmacy location registered on the HRSA OPAIS database for delivery of 340B-priced covered outpatient drugs listed on Attachment A if (I) the Covered Entity provides limited claims data with respect to that contract pharmacy location and (ii) that single contract pharmacy location is within 40 miles of the Covered Entity parent site.
In plain English, Johnson & Johnson is telling 340B covered entities, that — starting March 7 — they can designate only one pharmacy as a contract pharmacy in their networks, AND that the pharmacy has to be located within 40 miles of the health systems’ campuses.
Consider the implications for 340B-eligible patients who lack easy access to transportation: For all practical purposes it means that, unless that single contract pharmacy offers prescription-shipping services, they’re either NOT getting their medication — or they’ll be incurring significant personal costs to fill their prescriptions.
One of the most critical benefits our vast pharmacy industry offers is patient choice. By law, patients have the right to choose where they get their medications. Covered entities don’t dictate which pharmacies their patients use. But when restrictions limit 340B pricing to one contract pharmacy (much less zero pharmacies), they’re robbing patients of their legal right to choose.
Taking their cue from J&J, three more manufacturers — AbbVie, Amgen and GSK — promptly imposed 40-mile restrictions on 340B-eligible claims for their drugs. Then, on April 3rd, Novartis implemented its own “single pharmacy within 40 miles” policy.
Making the rich richer at the expense of the poorest and most vulnerable.
For 340B covered entities operating without the sophisticated processes and advanced analytical software developed by ProxsysRx, the impact of manufacturer restrictions has been devastating. 340B revenues for numerous covered entities has plummeted. Many of those Disproportionate Share Hospitals rely on 340B revenue to help fund their Uncompensated Care and Community Outreach efforts. And when it comes to uncompensated care, the term Disproportionate Share couldn’t be more accurate. In 2020, the average 340B DSH hospital provided $38 million in uncompensated care — while the average non-340B hospital provided just over $14 million (Source: 340B Health).
For VytlOne’s 340B team, those restrictions have meant an exponential increase in the time involved to ensure that the health systems we serve get the 340B savings to which they’re legally entitled. One VytlOne 340B Program Specialist estimates that he spends the first two to three hours of every day on the job dealing with manufacturer restrictions — and that’s before he’s submitted the first 340B claim for one of the three covered entity accounts he manages.
As of April 10, 2023, there were 21 manufacturers imposing restrictions — either through 340B ESP, or independent of the website:
Of the 21, nine currently promise to uphold one of the standards established by the 340B program requirements — enabling covered entities to designate and supply claims for an unlimited number of contract pharmacies. That means 12 (or 57%) of those manufacturers are in open violation of the intent of the 340B program — which was created to enable covered entities to use multiple contract pharmacies.
Describing just one aspect of his own experience with manufacturer restrictions, one VytlOne 340B Program Specialist notes, “Because they’re so ambiguous, and changing so quickly, the restrictions force our team to review all of the restricted NDCs on a daily basis. Every pharmacy we serve has to be cognizant of all 1628 restricted NDCs when submitting prescriptions for 340B savings. And when a covered entity has multiple contract pharmacies, there’s a multiplier in tracking NDC’s and prescriptions.
“Each one of our team members is literally monitoring thousands of prescriptions on a daily basis. Which is one reason our team continues to grow. And why our clients have benefited so greatly from the 340B PRO software we developed, which has enabled us to grow and scale. Because you don’t just have a single question needing answers on every prescription. It’s not just about the NDC’s. There are layers and layers of problem-solving involved.”
Without specialized software solutions, the average 340B-eligible health system would likely need a dozen (or more) full-time employees, just to monitor their prescriptions to maximize savings and revenue. VytlOne rolled-out the first version of 340B Pro in 2021, and we are constantly updating and adjusting it to deal with the ever-evolving challenges manufacturers introduce in their 340B pricing restrictions.
TPAs’ systems are not especially adept at monitoring and spotting provider / entity data mismatches — which are common occurrences in 340B programs. Nor do their fees generally incentivize them to improve their performance. That’s why helping health systems minimize data mismatches at the source is so critical to maximizing 340B drug pricing program savings for a covered entity — and why meeting that challenge is a core component of our 340B software and service package.
Over the years, VytlOne’s software has identified untold millions of dollars’ worth of 340B-eligible prescriptions missed by the TPAs working with hospitals we serve — as well as with their contract pharmacy networks. However, software solutions alone can’t reliably requalify prescriptions for 340B drug pricing program savings — for the simple reason that there has to be a reason each prescription is requalified. And that reason has to be defensible, if it’s challenged in audit.
All of that requires 340B program management experience and judgment on a prescription-by-prescription basis, and as anyone familiar with technology can tell you, Artificial Intelligence still has a long way to go in solving problems that require nuance and insight.
What’s more, when a prescription is coded incorrectly by a provider — which happens regularly in even the best-managed 340B programs — it creates what amounts to a Domino Effect of incorrect coding throughout the step-by-step process of submitting that prescription for reimbursement. Without the intervention of an experienced 340B manager, TPA software can actually make the situation even worse.
As much as we’d love to report that we’ve discovered the proverbial magic bullet for piercing manufacturer barriers to optimizing 340B cost savings and revenue, we can’t. Our process starts with an in-depth assessment of a health system’s current 340B-program status (assuming the health system has an active 340B program). Once we’ve conducted that analysis, we work with the health system’s 340B professionals to develop strategies for improvement in every area of its program. VytlOne’s 340B support team then implements software-supported processes for auditing missed opportunities.
For most of the hospitals we serve, VytlOne’s team also provides hands-on support in managing their 340B programs.
The good news is, our process is producing results. And while those results vary from system to system, one of the small rural hospitals we serve has seen a monthly net savings increase of more than 900% over their historical averages since manufacturer restrictions were implemented.
Below are the seven key elements of our process.
With manufacturer restrictions, it’s more important than ever that health systems have onsite pharmacies partnering with them to capture as many 340B-eligible prescriptions as possible — in part, to ensure that savings stay within the system, thereby enabling them to pass-along those savings to patients.
As with every aspect of our program, we learned this lesson through experience: When working in the 340B ESP platform, you should never upload any data that isn’t absolutely required by the platform. We submit the NDCs only from manufacturers that impose 340B pricing restrictions that are contingent on data reporting.
340B ESP says health systems should expect a period of 10 days, post-submission, for 340B prices to be restored in their contract pharmacies’ 340B wholesaler accounts. In reality, that rarely ever happens within 10 days — if at all. Which is why VytlOne has implemented a system for checking all NDCs, in all of our health systems contract pharmacies’ 340B accounts, before instructing their TPAs to restart processing on any restricted NDCs.
Health systems cannot assume that any 340B price restorations they have will actually be honored. Manufacturers working with 340B ESP routinely, and unilaterally, decide that the purchases made for arbitrarily-selected contract pharmacies are more than the dispenses.
Some manufacturers now require you to submit 340B purchase data reports within 45 or 60 days from dispense — or they disallow those submissions. Although VytlOne mines clients’ 340B-submission records for eligible prescriptions missed by their TPAs, the time frame is tight with these arbitrary, fraudulent manufacturer requirements — and thus far, we’ve yet to develop a workaround for dealing with them.
If you’re thinking you can simply pull reports from your TPAs and upload them, when submitting your own reporting to 340B ESP, think again. Most TPAs’ reports require significant modifications first. Your own uploads have to be submitted in 340B ESP’s exactingly-specified format, and every upload has the potential for reporting errors that can cause failures.
VytlOne is here to help, if you have questions.
There are so many ways to optimize your 340B savings and revenue, while overcoming 340B ESP and manufacturer restrictions. For more information, contact Howard Hall. C: 214.808.2700 | [email protected]3
The ultimate Win-Win scenario for any health system is increasing the quality of patient care, and getting paid to do it.
Chronic illnesses have become increasingly common in the United States. According to a report by The American Hospital Association, the number of Americans with chronic medical conditions will grow by a projected 14 million people between 2020 and 2030. According to some online reports, nearly 80% of new drug introductions are now specialty medications.
Moreover, for 340B-eligible hospitals dealing with increasingly squeezed bottom lines, an in-house specialty pharmacy offers enormous savings and revenue potential. Some covered entities generate as much as 600% in specialty pharmacy revenue from 340B drugs as they do in traditional retail / outpatient pharmacy 340B revenue.
In short, the reason 340B hospitals should build onsite specialty pharmacies is the significantly increased potential for generating 340B savings — and for passing-along those savings to patients in need. Today, hospitals and other 340B covered entities can acquire many specialty drugs for as little as 1¢ — which happens when a drug has hit its 100% Medicaid rebate cap.
In 2016, Humira, the top-selling drug in the U.S., hit the rebate cap. Since that time, 340B hospitals have been able to buy Humira, and many other specialty drugs — including Epclusa, Harvoni, Imbruvica, Iressa, Gilenya, Revlimid and Stelara — at significantly-reduced prices.
Nearly 90% of all large, for-profit hospitals are already operating their own specialty pharmacies. Ultimately, it stands to reason, every 340B health system looking to increase pharmacy revenue will need to consider building their own.
Onsite specialty pharmacies in 340B hospitals offer a seamless approach to caring for the “sickest of the sick” patients they serve. With their expertise, pharmacists at your onsite specialty pharmacy can collaborate closely with your health system’s providers, effectively managing complex medication regimens — while minimizing the risk of medication errors.
Medication non-adherence is the number one cause of unnecessary patient readmissions. Onsite pharmacies can play a pivotal role in improving medication adherence among patients likeliest to burden hospitals with costly, compliance-related readmissions.
Working in tandem with its retail pharmacy, a hospital’s specialty pharmacy can create efficient solutions to help manage prescription loads. Onsite specialty pharmacists can engage patients in one-on-one counseling, providing them with essential information about their medications’ purposes, potential side effects, and proper administration.
The top two reasons for patient noncompliance with medication protocols are 1) the prohibitive cost of their prescriptions, and 2) the limited availability of those prescriptions. Onsite specialty pharmacies in 340B hospitals can overcome those problems by procuring 340B specialty drugs at discounted prices.
With your own onsite specialty pharmacy, your hospital can capture a greater percentage of the 340B revenue that would otherwise go to outside pharmacies — supporting your financial stability, while enabling you to expand healthcare services and make infrastructure improvements in serving your community.
Patient satisfaction is an increasingly essential aspect of the Quality Ratings that impact many 340B health systems’ reimbursement rates.
Onsite 340B specialty pharmacies can contribute to higher satisfaction levels in several ways:
Onsite specialty pharmacies can serve as valuable resources for 340B hospitals conducting clinical research — promoting medical innovation and, ultimately, benefiting patient care for everyone.
The integration of onsite specialty pharmacies within 340B hospitals enables the collection and analysis of comprehensive patient data. With enhanced data-driven insights, 340B hospitals can continually improve their patient care protocols and optimize treatment outcomes.
The majority of 340B-eligible medications under access-restrictions are the most expensive and profitable drugs — which often means specialty drugs. This includes the aforementioned 40-mile-radius restriction and the Single Contract Pharmacy restriction.
Fortunately, there is a workaround for 340B hospitals forced to select a single pharmacy for certain manufacturers’ 340B pricing — and it’s legal in many states. Hospitals can operate specialty pharmacies alongside their retail pharmacies IF the two operations are in separate spaces (with separate Pharmacists-In-Charge), and there is no procedural, functional or personnel overlap between the two.
The not-so-good news for 340B hospitals is: Opening a specialty pharmacy is extremely challenging — particularly given the effort required just to get access to purchase specialty meds, and then to get “In Network” with PBMs. Payers and manufacturers control the players in Specialty, so newcomers need significant support and guidance navigating the process. That doesn’t even account for how hard it is accrediting and running a Specialty Pharmacy.
How VytlOne makes it easier for 340B hospitals
We guide the health systems we serve through the process steps that they’re required to participate in. Fortunately, those steps tend to be the least burdensome in the process. We handle the rest of the process — painstakingly documenting everything we do, and reporting back to the health systems at every critical step.
Internal operations are only part of the formula for a specialty pharmacy’s success. Which is why we seek inclusion from all PBMs in a health system’s area. We go in-network, securing cooperation and approval from all the major local insurers, for the PBMs that their patients are covered by. What’s more, we seek access from the drug manufacturers for what they’re prescribing — even the most egregiously restrictive manufacturers.
Specialty pharmacies require costly accreditation, both financially and in terms of the time investment. You must contract with payers. Securing each contract takes considerable time and effort. You must provide a tremendous amount of data and analytics to PBMs and manufacturers, to prove that you can provide the level of quality patient care expected of Specialty Pharmacies.
A well-run retail pharmacy can generate significant revenue and profits for your health system. Consider setting-aside a percentage of your 340B retail-prescription savings. By earmarking them for funding the project, you can gradually build-out your onsite specialty pharmacy capabilities — while analyzing your clinics and workflows — without drawing large capital expenditures from your budget.
When VytlOne builds-and-owns or manages retail pharmacies for health systems, we only pay ourselves from the revenue and savings we generate on their behalf. We take-on all the risk, so they are never exposed to the potential for loss.
As you start building a specialty pharmacy, you can take steps towards accreditation — but you have to make sure that you have the policies, standards and protocols in place to ensure that your specialty pharmacy meets those accreditation standards.
You can actually start filling prescriptions on Day One, but it takes work to find the prescriptions you can fill immediately. Accreditation can take 6 months to a year, depending on the health system and the process of integrating a specialty pharmacy into its resources.
You have to have reporting in place when you begin filling prescriptions. And while you’re filling those prescriptions without accreditation, you’re getting in the networks with your PBMs. And then, as you get your pharmacy and process stood up — and its procedures and policies in place — you’re able to become accredited.
When you become accredited, you have to keep certain metrics for patient phone calls. That means there must be someone in the pharmacy every hour it’s open. Someone who can answer phone calls promptly, so your patients have easy access to a pharmacy professional, who can answer their questions — and make sure they’re getting the appropriate care. For accreditation, this confirms that you’re a qualified specialty pharmacy, and that you’re taking care of your patients in the possible best way.
There are patient monitoring and clinical assessments that have to be tracked and measured. Every specialty pharmacy patient should be monitored by a clinic pharmacist.
In initial assessments, specialty pharmacists should ask patients what other medications they’re on, and what side effects they’ve experienced. Specialty pharmacy pharmacists should also work hand-in-hand with patients’ providers, to make sure that medication regimens are appropriate, up to date, and the most accurate regimens for patients and their disease states.
In addition to ongoing monitoring, most patients should be monitored yearly by pharmacists — to review any side effects they may be having, or any other issues they have taking their medication.
Pharmacists should ask patients if they’ve skipped any medications, and if it’s affected their disease state. Moreover, all of that data should be reported back to the accrediting bodies.
Patient satisfaction surveys, conducted by independent third parties, are required — to ensure that you’re upholding high standards.
To ensure that you’re meeting or exceeding those standards, you should carefully review your specialty pharmacy’s processes. You should also make sure your providers know what it takes to ensure that patients know you care about their outcomes, and that they have the access to the appropriate medication.
Most specialty medications are delivered to patients at home. A lot of them require refrigeration, and some have to be frozen. Some need to stay at room temperature, and can’t get too hot or too cold.
All of which is why it’s so important that your specialty pharmacy follows shipping and packaging protocols required by the accrediting bodies. You need a Cold Chain Vendor for shipping and packaging medications at appropriate temperatures. You also need processes and policies in to test vendors’ capabilities.
VytlOne has its own technology platform in place that pulls all the data, so we can create the necessary outlooks and outputs from our analytical tools. Data we then report back, not only to the accrediting bodies, but also to the payers — the PBMs. That way, when we’re getting a specialty pharmacy in-network for a patient’s PBM, we can bill for the patient’s care.
That said, your health system should invest in similar software capabilities for your specialty pharmacy.
VytlOne’s unique approach to specialty pharmacy provides health systems with a financial “glide path” to help fund their specialty pharmacies. One that starts with optimizing their 340B network. We’ve proven that VytlOne can help health systems improve revenues — often by millions of dollars annually — while their specialty pharmacies are being built. More importantly, we do it while helping hospitals improve the quality of patient care.
There are so many ways to optimize a 340B program, while making it more compliant. And it’s changing all the time, so we’re always looking for new ways to ensure that we’re capturing everything coming out a health system.
What causes negative reimbursement? Several factors, including:
Many PBMs will not pay for prescriptions right out of the gate, so there are a lot of hurdles you have to jump with payors to get drugs covered. Even after 340B specialty drugs are covered, copays can be very high — sometimes thousands of dollars. Most patients can’t afford copays that high, so you need to know how to get copay assistance. There are a number manufacturer programs, and other assistance programs — including charity care. Learn to use all those options, to make sure your patients can get their prescriptions promptly.
Another benefit of having a pharmacist embedded in the clinic where your patients are is: They’re able to look for financial assistance, and perform those prior authorizations — making sure that prescriptions are going to be paid for, and that patients can afford them.
Very often, patients have prescriptions from both a hospital’s retail pharmacy and its specialty pharmacy. Make sure each pharmacy team always knows what the other is doing, as far as providing for those patients — even to the point where patients can routinely call your retail pharmacy with questions, and get answers about their specialty drugs.
Of course, when it comes to anything clinical about patient monitoring, or anything that has to do with high-complexity meds, patients should be connected with clinical pharmacists familiar with their disease states.
You should also ensure that specialty-medication patients speak to your clinical pharmacists before each refill, to answer questions or concerns — and check for medication effectiveness and side effects.
VytlOne helps health systems create a financial glide path to build their specialty pharmacies. A path that ensures the burden of financing their specialty pharmacy is of little to no risk to the health system.
We take the burden of opening a specialty pharmacy off your health system. We navigate you through the process of getting your specialty pharmacy running and successful. We handle the accreditation requirements. We get you access to the medications you need. We get you access to the payors.
We also take responsibility for integrating your specialty pharmacy with your clinic teams. Then we take-on everything that’s required to grow your specialty pharmacy. We get to know your doctors, your clinicians, and your patients — so that we can tailor your specialty pharmacy’s services and medications to the needs of your patients, and the difficult disease states that your health system needs to manage.
The 340B landscape continues to evolve rapidly. Manufacturer restrictions, rebate model proposals, state-level legislative activity, contract pharmacy challenges, and increasing data transparency expectations are all reshaping how covered entities manage their programs.
For hospitals and health systems that depend on 340B savings to support patient care, community programs, and pharmacy operations, this changing environment makes proactive oversight more important than ever. The organizations best positioned for long-term success are the ones treating 340B as a strategic, operational, compliance-driven program, not simply a discount mechanism.
Since 2019, VytlOne has supported the pharmacy programs of 33 health systems and 38 health centers, generating nearly $1 billion in pharmacy-related savings for our clients. Even as manufacturer restrictions have created major challenges across the 340B landscape, the health systems whose 340B programs we manage have continued to identify opportunities for savings, revenue growth, and improved patient support.
One thing 340B program veteran Heather Brooks knows for certain is, nobody should ever consider themselves a 340B Expert.
“I can’t tell you how often this happens,” she says: “I start my day by reading an email that changes all of the data analytics my team had been using to submit a significant percentage of our clients’ 340B prescriptions.”
340B program stakeholders should continue preparing for regulatory, legislative, and operational change. Recent developments have included increased scrutiny of contract pharmacy arrangements, manufacturer-driven data reporting demands, evolving state-level protections, and proposed changes to the way certain 340B discounts may be processed.
One of the most significant developments to monitor is HRSA’s 2026 Rebate Model Pilot Program. Under a rebate model, covered entities may be required to pay upfront pricing and later seek reimbursement after submitting required documentation. If expanded broadly, this type of model could create meaningful cash-flow, documentation, and reconciliation challenges for participating health systems.
For hospitals, the practical concern is not only whether reimbursement is ultimately received, but how long it takes, what documentation is required, and how much working capital exposure the organization must absorb while waiting for rebate payments.
Additional changes to watch include continued manufacturer restrictions, state-level 340B protection laws, evolving PBM and payer dynamics, and increased expectations around data transparency, eligibility documentation, and program integrity.
In our experience, most hospitals’ 340B teams are comprised only of the Director of Pharmacy and a Pharmacy Tech. That doesn’t work, and it never will.
As the 340B program becomes more complex, health systems need stronger infrastructure, clearer governance, better software, and more consistent operational oversight. The goal is not only to protect current savings, but to build a program that can adapt as manufacturer restrictions, payer rules, specialty pharmacy demands, and compliance expectations continue to change.
Whatever software platform you use to manage your 340B program should minimize the unnecessary legwork your team-members undertake to submit prescriptions.
“The 340B program’s ultimate challenge,” Brooks continues, “is to pull-together all the moving parts. In our experience, every covered entity managing its own 340B program gets everything in pieces, but they don’t have all the pieces in one place.”
Specialized software can help covered entities organize encounter data, prescription activity, eligibility logic, contract pharmacy performance, replenishment workflows, and reporting requirements in a more consistent way. But software alone is not enough. The strongest programs combine analytics with experienced human oversight, because many 340B decisions still require judgment, context, and operational interpretation.
As we noted in an in-depth blog post, every health system VytlOne serves came to us with shortcomings in their contract pharmacy networks. The average number of quality 340B contract pharmacies we’ve added to their networks is five to ten.
You should also carefully evaluate your 340B program TPAs.
“For instance,” she notes, “While we were onboarding one 340B hospital, we discovered a TPA that was charging them a percentage of every prescription matched. We renegotiated their service contract to a flat fee basis, which saved the hospital $400,000 in just one year.”
As manufacturer restrictions and pharmacy network limitations continue to evolve, contract pharmacy and TPA performance should be reviewed regularly. Covered entities should evaluate fee structures, match rates, replenishment activity, reporting accuracy, payer workflows, and the practical convenience each pharmacy offers to patients.
The strongest networks are not necessarily the largest. They are the networks that produce reliable savings, support patient access, maintain compliance visibility, and align with the covered entity’s broader pharmacy strategy.
For an overview of best practices to keep your 340B program compliant and audit-ready, review our 340B best practices guide. To discuss best-practice updates we’ve implemented since publishing that post, contact us anytime.
Best practices should not be treated as static. As program rules, manufacturer policies, payer expectations, and technology requirements change, health systems should periodically revisit their policies, documentation, internal workflows, and monitoring processes.
A strong best-practice review should include contract pharmacy oversight, patient eligibility documentation, duplicate discount prevention, inventory management, internal auditing, TPA performance, and specialty pharmacy strategy.
“Once our 340B program was large enough,” says Brooks, “we assigned team members to their own health systems. VytlOne now supports every major private-sector covered entity category (DSH, RRC, PED, CAH, RHC, FQHC). Needless to say, that has had a tremendous impact on our collective 340B program knowledge and experience.
If your health system is managing its own 340B program, it is critically-important that you build a network of covered entities for sharing knowledge and ideas.
Because every covered entity type faces different operational pressures, learning across entity categories can help health systems identify risks and opportunities they may not see within their own program alone. This is especially important as state laws, manufacturer restrictions, specialty pharmacy requirements, and payer behavior continue to shift.
As we’ve discussed in this resource guide’s Chapter Six, the ideal option for optimizing your health system’s 340B specialty-prescription revenue (not to mention patient outcomes) is to have your own onsite specialty pharmacy.
Specialty pharmacy will likely remain one of the most important areas of opportunity for 340B-covered entities. Many high-cost medications are specialty drugs, and manufacturer restrictions often have an outsized impact on specialty pharmacy access, reimbursement, and program economics.
Health systems that can build, fund, accredit, and clinically integrate specialty pharmacy services may be better positioned to support patients with complex conditions while also strengthening pharmacy revenue and long-term program sustainability.
As pharmacy economics become more complex, some health systems are also evaluating models that give them greater transparency and control over prescription pricing, formularies, pharmacy margins, and patient affordability.
For 340B hospitals, the ability to better understand and manage pharmacy economics can support both financial performance and patient care. This may include evaluating PBM relationships, pharmacy network design, employee prescription benefits, retail pharmacy performance, and specialty pharmacy opportunities.
The larger strategic question is whether the health system has enough visibility and control to make pharmacy a stronger part of its revenue cycle and patient care model.
Launching and maintaining a successful 340B program starts with your health system truly understanding 340B’s savings and revenue potential — and, in turn, the potential of your 340B income to positively impact patient outcomes, not to mention your system’s overall mission in the community you serve.
“The hospitals who benefit the most from working with us,” says Brooks, “are the ones who are willing to collaborate with us, and recognize that they can trust us. We do the vast majority of the work, but we still need their support — particularly in responding to our team’s data requests.”
Successful 340B programs require alignment across pharmacy, finance, compliance, clinical leadership, IT, revenue cycle, and executive teams. When those teams understand the importance of the program and respond quickly to data, documentation, and workflow needs, the program is much better positioned to perform.
“It’s no secret that some covered entities have more existing 340B opportunities than others,” she continues, “because they have more 340B-compatible clinical programs. We’ve helped number of health systems add clinical programs that can serve new 340B-eligible patients.”
“Ultimately,” Brooks concludes, “what gives me the greatest job satisfaction from serving health systems’ 340B programs is my ability to positively impact their missions. I consider myself to be more than just a partner of those hospitals. In a very real sense, I’m an extension of their missions.”
The future of 340B will likely reward organizations that combine compliance discipline with operational creativity. Health systems that invest in data, pharmacy infrastructure, specialty pharmacy capabilities, contract pharmacy optimization, and cross-functional program support will be better prepared to adapt as the landscape continues to change.
VytlOne is here to help, if you have questions.
There are so many ways to optimize your 340B drug program savings and benefits — overcoming manufacturer restrictions while maintaining compliance at all times. For more information on any aspect of developing and managing a successful 340B program, contact Howard Hall. C: 214.808.2700 | [email protected]
The 340B Drug Pricing Program was created to help eligible safety-net providers stretch limited healthcare resources and expand access to care for vulnerable and underserved populations.
By allowing covered entities to purchase eligible outpatient prescription drugs at significantly reduced prices, the program helps hospitals, health centers, and other qualifying organizations support patients who may face financial, geographic, or social barriers to care.
340B savings can help covered entities:
In practical terms, the 340B program helps safety-net providers do more with limited resources, while supporting the patients and communities that rely on them most.
340B eligibility generally applies to two broad categories of covered entities: qualifying hospitals and federal grantee organizations.
Eligible hospital types may include:
Hospitals must meet specific eligibility requirements, which may include government ownership or contract requirements, Medicare Disproportionate Share Hospital thresholds, and certain restrictions related to Group Purchasing Organization participation.
Federal grantee organizations may also qualify based on their role in serving vulnerable or underserved populations. These may include:
Hospitals and grantee organizations may also extend 340B eligibility to qualifying outpatient locations, often referred to as child sites, when those locations meet applicable registration and reimbursement requirements.
The financial impact of 340B participation varies significantly based on the size of the organization, payer mix, outpatient volume, specialty pharmacy opportunity, contract pharmacy activity, and the strength of the program’s management processes.
For many covered entities, 340B can be one of the most financially meaningful tools available to support safety-net care. Savings may come from reduced acquisition costs on eligible outpatient drugs, improved pharmacy revenue, better prescription capture, specialty pharmacy opportunities, and stronger contract pharmacy performance.
The direct financial benefit depends heavily on how well the program is structured, monitored, and optimized. A well-managed 340B program can create meaningful savings, but those savings must be balanced with strong compliance oversight, clear documentation, and ongoing operational discipline.
Beyond direct pharmacy margin, the broader value of 340B often comes from how those savings are reinvested into patient care, community health, and service-line sustainability.
340B savings can support a wide range of programs and services that improve patient access, affordability, and community health.
Common reinvestment areas include:
For many covered entities, 340B savings also help maintain services that are important to the community but difficult to sustain financially. This can be especially important for rural hospitals, safety-net providers, and organizations serving large numbers of low-income or medically vulnerable patients.
When reinvested effectively, 340B savings can help improve medication adherence, reduce avoidable readmissions, expand access to care, and strengthen the overall health of the communities served.
The strongest 340B programs balance savings optimization with consistent compliance oversight. Optimization should not mean pursuing every possible savings opportunity without regard for risk. Instead, the goal is to identify eligible opportunities while maintaining accurate documentation, appropriate controls, and strong internal governance.
Important best practices include:
A strong 340B program should be both financially effective and operationally defensible. That requires software, process discipline, internal accountability, and experienced oversight.
Manufacturer restrictions and 340B ESP reporting requirements have made 340B program management more complex. Covered entities often need stronger data, better reporting workflows, and more active oversight to protect eligible savings opportunities.
Common mitigation strategies include:
Because manufacturer policies and reporting requirements continue to change, covered entities need processes that are flexible, data-driven, and actively managed. The most effective programs combine technology with experienced human oversight, especially when resolving complex eligibility, replenishment, and reporting issues.
340B programs often involve multiple data sources, including encounter data, prescription records, provider files, contract pharmacy activity, payer information, replenishment data, and TPA reports.
Specialized software can help covered entities bring those moving parts together in a more organized and auditable way.
The right technology can support:
However, software alone is not enough. Many 340B decisions require operational judgment, compliance interpretation, and experience. Strong programs combine software, analytics, process oversight, and human expertise.
Contract pharmacies can help covered entities expand patient access and capture eligible prescriptions outside of an in-house pharmacy setting. They may also improve convenience for patients who need local access to medications.
However, contract pharmacy arrangements require careful oversight. Covered entities remain responsible for maintaining compliance, preventing diversion and duplicate discounts, and ensuring that contract pharmacy activity aligns with program requirements.
Important factors to evaluate include:
The strongest contract pharmacy networks are not always the largest. They are the networks that support patient access, maintain compliance visibility, and generate sustainable net value for the covered entity.
Specialty pharmacy can be one of the most important opportunities for 340B-covered entities because many specialty medications are high-cost drugs used by patients with complex chronic conditions.
An effective specialty pharmacy strategy can help covered entities:
Specialty pharmacy also creates additional operational complexity. Accreditation, payer access, manufacturer access, prior authorizations, patient monitoring, data reporting, and clinical integration all require significant expertise.
For many health systems, specialty pharmacy can become a major strategic opportunity when it is built with the right operational, clinical, financial, and compliance foundation.
The 340B landscape continues to evolve. Manufacturer restrictions, contract pharmacy limitations, rebate model proposals, state-level legislation, PBM dynamics, specialty pharmacy growth, and increased data expectations all create new challenges for covered entities.
To prepare, health systems should focus on building stronger infrastructure around the program.
That includes:
The covered entities best positioned for long-term success will be the ones that treat 340B as a strategic program requiring ongoing oversight, not a passive discount program.
