About three years after being signed into law, one provision of the Inflation Reduction Act (IRA) that is of particular importance to 340B hospitals is about to take effect: Medicare price caps. Jan. 1, 2026, marks the date that the first 10 Medicare drugs will be subject to a maximum fair price (MFP). Meetali Desai, director of pharmacy business services at UMass Memorial Medical Center, joins us to explain how this will affect 340B hospitals and health centers such as hers.

The Good and Bad News for Covered Entities

The good news, Desai says, is that there is potential for the 340B ceiling prices to go down for certain medications. This is because the MFP will become the new “best” price in the formula for calculating 340B prices. However, because the law will cap reimbursement rates to MFP when Medicare patients receive those drugs, 340B hospitals will see their 340B savings amounts go down for those dispenses.

Updated Calculator Can Help Hospitals Gauge Potential Impact

340B Health recently updated its calculator for hospitals to use to estimate the effects of MFP pricing based on the newest data. This new calculator allows users to project what the potential impact from the IRA could be on a hospital, including if drugmakers decide to lower their list prices significantly to avoid IRA inflation penalties. This drop in prices of Medicare drugs could result in 340B hospitals seeing higher ceiling prices and reduced savings.

Reduced Savings Could Impact Patient Care

Desai says Medicare price caps, combined with other financial pressures on hospitals, could mean some rough times ahead for hospitals that care for a large proportion of low-income patients. She encourages 340B teams to share their results from the IRA calculator with their senior leadership and with 340B Health as the hospital community prepares for the impact of these caps.

Resources

1. Use Our IRA Calculator and Share How Your 340B Savings Will Change
2. Read Our Analysis: Second Federal Court Affirms HRSA's Authority Over 340B Rebates

Health systems eligible for 340B savings must strike a balance by staying compliant with purchasing rules while also maximizing the amount of eligible savings they can obtain to invest in patient care. Angela Campitelli, the director of the pharmacy 340B program at MetroHealth System in Cleveland, explains how a hospital system such as hers implements a purchasing strategy that achieves that balance.

Following rules for 340B purchases

Disproportionate share (DSH) hospitals, children’s hospitals, and cancer hospitals are subject to a group purchasing organization (GPO) prohibition that bars them from buying covered outpatient drugs on GPO accounts. That requires maintaining a purchasing system that involves buying drugs at wholesale acquisition cost (WAC) for neutral inventory and then replenishing at 340B, WAC, or GPO pricing depending on how the drug is used.

How the cycle can break down

Purchasing drugs outside of the outlined processes could cause violations of the GPO prohibition or other 340B rules, which could lead to sanctions that might include losing eligibility for 340B. That is why health systems such as MetroHealth use staff education, regular auditing, and other safeguards to ensure they are purchasing and replenishing drugs on the correct accounts.

Investments in the strategy

Campitelli recommends 340B hospital teams bring their senior leadership on board to invest in auditing and other resources to ensure a strong purchasing strategy. Such investments will help avoid potential rule violations while ensuring that hospitals are not walking away from 340B savings to which they are entitled.

Resources

1. 340B Health Appeals Rebate Ruling; Federal Court Agrees to Fast-Track Drugmaker Appeals

After months of litigation in a federal district court, a key decision recently came out in the legal fight over 340B drug rebates. 340B Health Vice President of Legal and Policy Amanda Nagrotsky updates us on the development.

Court deals a blow to drugmakers

D.C. district court judge Dabney Friedrich ruled on May 15 that manufacturers cannot unilaterally implement rebate models for 340B, agreeing with the Health Resources & Services Administration (HRSA) that the agency effectively has preapproval authority over rebates. In her decision, the judge cited early results from a 340B Health survey finding that shifting 340B to a rebate model would divert significant hospital resources from patient care. Drugmakers have already appealed the ruling.

Some bright spots for drugmakers in this decision

Although the decision largely went against pharmaceutical companies, the judge ruled that the 340B statute does not categorically prohibit rebates, leaving the door open for government approvals of rebates. The judge also agreed with drugmakers’ assertions that HRSA should consider how rebate models could improve 340B compliance and how requiring the sharing of data through rebates could aid in drug company audits of covered entities.

Will HRSA stop all rebates from proceeding?

Despite this decision, the legal fight over rebates isn’t over yet. The judge found that, for three of the manufacturers in these cases, HRSA has yet to issue final decisions with respect to their proposed rebate models. In the case of Sanofi, the judge found that HRSA failed to adequately explain the legal basis for rejecting the drugmaker’s rebate model, and she directed the agency to reconsider its decision and explain whether and how it would violate the 340B statute. HRSA sent rebate guidance to the White House for approval earlier this month, though as of recording this episode it was not known what that guidance would say.

Resources

1. Read Our Analysis of the First Federal Court Decision on Rebates
2. 340B Health Continues Court Fight Against Rebates

More than a third of patients released from the hospital never fill their discharge prescriptions, but “meds-to-beds” programs can help improve that statistic. That is the approach Renown Health in Reno, Nev., took with the help of its 340B savings. Renown Vice President of Pharmacy Services Adam Porath joins us to describe how this meds-to-beds program improves patient care.

Hospital readmissions down, patient convenience up

Renown Health’s 340B-funded program offers medication to patients who are being discharged from the hospital, either through bedside delivery, pneumatic tube, or a unique discharge lounge. The effort began as a pilot for Medicaid patients in 2016, and it demonstrated patients in the program were 25% less likely to be readmitted to the hospital once discharged. These health improvements plus the added convenience of medication access for patients convinced the system to expand the program.

340B pricing to patients who cannot pay

Porath says Renown Health refers patients who cannot afford discharge medications to its social services team, which can authorize providing the drugs to those patients at the 340B-discounted rate. The team also will work with patients to see if they qualify for coverage such as Medicaid or other programs to reduce their out-of-pocket costs. Porath said Renown’s meds-to-beds program provides drugs free of charge to about 30 patients per month.

The keys to success

Renown Health’s meds-to-beds program has been a success, with more than 80% of eligible patients participating as of the end of 2024. The hospital expanded the services to all patients and started operating it 24/7 in April 2024. Porath said the keys to success include regular reporting to stakeholders and innovations to handle a large volume of patients discharging at once. Such changes allow all parties to stay in the loop with the development of the program and to celebrate successes as they occur.

Resources

1. Read Our Analysis of the First Federal Court Decision on Rebates
2. Second Federal Judge Allows 340B Health, Member Hospitals To Intervene in Rebate Lawsuit

Big potential changes to how 340B operates plus heightened interest in both new protections and new restrictions for covered entities means there is much to keep track of in the 340B world. 340B Health CEO Maureen Testoni joins us to make sense of recent developments in the nation’s courts and beyond.

Rebates Get Their Day in Court

340B Health, two member hospitals, and the government met drug companies in court in late April to challenge drugmaker attempts to replace 340B discounts with rebates. Testoni says the judge cited potentially devastating consequences to hospitals if rebates proceeded but also had probing questions for the government on how it is working to address drugmaker compliance concerns. The Dept. of Health and Human Services is set to release guidance by early June on the rebate issue, and the court’s decision could come out soon.

The White House Proposes 340B Big Oversight Shift 

A leaked copy of the Trump administration’s latest budget proposal includes a plan to move the Office of Pharmacy Affairs (OPA) from the Health Resources & Services Administration to the Centers for Medicare & Medicaid Services. Testoni says the oversight shift is concerning because of a stark difference between the purpose of 340B and the operations of Medicare and Medicaid. CMS also imposed years of Medicare payment cuts to 340B hospitals that the U.S. Supreme Court eventually overturned.

340B Protections, Mandates Take Center Stage

States continue enacting laws to protect hospital access to 340B pricing, but they also are moving forward with reporting mandates and proposals to define how hospitals should use their savings. Testoni said reporting and use-of-savings mandates lead to misdirected views on the purpose of 340B, which goes far beyond direct patient care and cost assistance. On Capitol Hill, a report from a long-running investigation of 340B recently came out, contributing to the debate over possible new restrictions.

Resources

1. Federal Government Signals Upcoming Guidance on 340B Rebate Models Amid Legal Challenges
2. Brief Your Leaders on White House Plans for Major 340B Changes
3. Nebraska Is 12th State To Enact Contract Pharmacy Protections
4. Indiana Becomes Fifth State To Mandate 340B Reports From Hospitals
5. Key Senator Concludes 340B Investigation, Calls for Major Reforms
6. New 340B Health Research
7. 340B Impact Profiles

The ancillary outpatient sites known as 340B child sites serve as important places for patients to access the drugs and care they need. There are crucial steps involved in effectively onboarding potential child sites as well as ongoing processes involved with maintaining the parent hospital’s partnership with those sites. University Hospitals Cleveland Medical Center  340B Pharmacy Manager Joe Moss joins us to shed light on this process and the potential problems to be on the lookout for.

How is a 340B child site onboarded?

Moss says the first big step to identifying potential sites is to work with a hospital’s finance, revenue, pharmacy, and legal departments to evaluate a site. The team looks at Medicare cost reports and trial balances to ensure they are eligible for 340B. As part of the process, they also use electronic medical record and retail data to identify potential clinic areas based on their patient volumes.

A 340B child site is registered. Now what?

The work is not over once a child site has been registered in 340B. UH has a program it calls the “340B Concierge Program,” which aims to provide comprehensive, ongoing support and guidance to a given child site. The program offers additional education and information in such areas as procurement processes, the appropriate ways to handle drug transfers, and miscellaneous licensing issues.

Onboarding requires relationships and a close eye on compliance

Moss says that hospitals onboarding a child site should establish and maintain close ties with the site to prevent issues with 340B compliance. This can involve being the first line for any pharmacy issues the site staff might be having, holding frank conversations with clinic management when necessary, and inviting staff to observe mock audits so they can learn more about what goes into maintaining 340B compliance.

Resources:

1. Trump Executive Order Could Revive Medicare 340B Cuts

Health Resources & Services Administration (HRSA) audits of hospitals play a key role in ensuring compliance with 340B rules and regulations. In this episode, Dave Lacknauth, executive director of pharmacy services at Broward Health in Fort. Lauderdale, Fla., joins us to discuss the importance of taking a proactive, comprehensive approach to audit readiness with the goal of ensuring clean audit results. 

Compliance protects 340B access

Being prepared for HRSA audits serves a crucial function that ultimately benefits the patients whom hospitals serve, Lacknauth explains. Maintaining the integrity of 340B means protecting access to 340B savings that hospitals can invest in crucial care for community members that need it. 

Continuous audit readiness

Lacknauth discusses how Broward Health maintains audit readiness by conducting internal audits, bringing in external consultants, and identifying areas of opportunity for improvement. A robust system of internal reviews means that when HRSA comes knocking, Broward Health is already prepared. This was evident after a recent audit of one of the system’s hospitals that resulted in zero recommendations for improvement.

Organization, resources, transparency are key

Preparing for audits requires a health system to invest time and resources, but Lacknauth stresses that these investments pay off. Engaging a comprehensive team from various departments in the audit readiness process allows for a health system to have the appropriate level of responsiveness and transparency during a HRSA audit.

Resources:

1. Nebraska Is 12th State To Enact Contract Pharmacy Protections
2. Idaho Becomes Fourth State To Mandate 340B Reports From Hospitals

Artificial intelligence continues to impact industries, including pharmacy and 340B. As hospitals and health systems consider adopting AI, we spoke with Kristin Chupka, the 340B program system director for Dartmouth Health, who shares her experience launching this initiative there and considerations for entities seeking to do the same.  

AI, automation, and how they can support 340B

Chupka distinguishes that AI is like a machine learning and making decisions depending on what it is taught. Automation, although similar to AI, does not make decisions. Both can systematize processes and with the help of guardrails, enable pharmacists to dedicate more time to patient care. 

Opportunities and considerations 

The novelty of AI promises an opportunity for 340B teams that can consider and correct its potential pitfalls. Chupka explains that as with any emerging technology, it is best to start slowly, teach the algorithm, and consistently check in to ensure accuracy and ethical considerations. This approach can limit errors and inspire confidence as time goes on. 

What entities can learn from Dartmouth Health? 

The Dartmouth Health team has explored how AI can help with budgeting, modeling, and auditing, always double-checking work to avoid errors. Because a fully staffed team is required for this, Chupka reassures that AI has not affected staffing. If anything, Chupka says AI is a tool to assist in compliance. 

Check out all of our episodes on the 340B Insight podcast website. You also can stay updated on all 340B Health news and information by visiting our homepage. If you have any questions you’d like us to cover in this podcast, email us at [email protected]. 

Resources:

1. 340B Health, Member Hospitals Ask Court To Throw Out Drugmaker Rebate Lawsuits)

Hospital clinical pharmacies play a key role in ensuring patients are taking medications effectively and supporting other providers who are managing their care. Mark Riggle, the assistant chief pharmacy officer at UC Davis Health, explains how 340B helps make this direct care and ancillary support possible.

Clinical pharmacies are a bridge between providers and patients

Riggle says clinical pharmacy teams serve as drug experts that can help teach patients about potential side effects and how to take their medications properly. But these teams also can take the lead on supporting other providers on refills, prior authorizations, financial assistance, and more. That allows the other providers to focus less on those processes and more on providing medical care to the patients. 

In-house pharmacies can improve patient care and generate revenue

Using an in-house clinical pharmacy has benefits for both patients and the hospital. Riggle notes that keeping prescriptions and pharmacy support in-house can enable hospitals to keep better track of patients’ health and identify if there are issues or questions with certain medications. At the same time, it generates revenue and 340B savings that support even more hospital services and improve patient health outcomes even more.

Ramping up clinical pharmacy services and overcoming barriers can take time

Riggle says expanding clinical pharmacy initiatives at UC Davis Health has come with some challenges. It took years to roll out a refill program for all the providers who needed that support, and achieving success with a prior authorization program involved an evaluation of workflows to improve efficiency. But he noted that hospital pharmacists can present a value proposition to their leaders for how investing in 340B-supported clinical pharmacy services can be worth it to improve care quality and provider satisfaction.

Resources

1. Federal Judge Allows 340B Health, Member Hospitals To Intervene in Rebate Lawsuits

The legal fight over drugmakers’ push to impose 340B rebates is heating up, with five lawsuits pending in a federal court in Washington, D.C. Recently, 340B Health joined with two of its member hospitals in asking the court to intervene as defendants to stop these rebates from taking effect. Genesis HealthCare System based in Ohio is one of those hospitals. Shona Carr, the director of 340B and ambulatory pharmacies at Genesis, breaks down how rebate models would create financial challenges for hospitals that would hamper their patient care initiatives.

Carrying and Compliance Costs

Each drugmaker’s push to impose rebates would incur new drug purchasing and compliance expenses for covered entities. Bristol-Myers Squibb’s rebate policy alone would cost Genesis HealthCare System an additional $400,000 per month in drug spend if it applied to all BMS drugs. If 340B rebate models became the norm for all drugmakers, Carr estimates Genesis would pay an additional $5.2 million per month in upfront costs. Those figures do not include additional hundreds of thousands of dollars in annual staffing expenses to process rebate claims and challenge denials.

Effects on Patient Care and Support

Imposing 340B rebates could force Genesis HealthCare System to scale back or discontinue its patient assistance program, according to Carr. But 340B savings do not just go towards direct patient help with drug costs at the hospital. The financial impact of rebates also could affect other community programs and free services, such as patient transportation, meds-to-beds, health screenings, and a paramedicine program.

Advice for Other Hospitals

Carr says every covered entity that has not already done so should begin reviewing drugmaker rebate policies and working with their 340B third-party administrators to estimate potential costs. She says this involves entities asking bigger questions: Would rebate policies require additional 340B staffing? Does senior leadership understand the potential impact of these changes? What 340B-funded programs might be at risk?

Resources:

1. 340B Health Seeks To Intervene in All Drugmaker Rebate Lawsuits
2. Declaration of Shona Carr in Support of Motion To Intervene