Sitting at the intersection of healthcare policy, hospital finance, and patient access, the 340B drug discount program is a hot button issues in the pharmacy space. The program is critically important to providers that serve high volumes of low income and vulnerable patient populations, but it’s drawing increasing scrutiny.

340B was established in 1992 as part of the Public Health Services Act to help providers stretch scarce resources, expand services, and improve access to care for those most in need. It does this by requiring pharmaceutical manufacturers participating in Medicaid to sell outpatient drugs at significant discounts to safety net hospitals and other covered entities – including federally qualified health centers (FQHCs), HIV clinics, homeless clinics and more. Covered entities are reimbursed for the full cost of the medication and use that margin to offset losses from caring for low‑income, uninsured, and underinsured patients. It’s become a critical component to their operating budgets.

The program has grown substantially since its inception, with increasing numbers of hospitals and entities participating. This expansion has led to questions about whether the program is being used as intended or stretched beyond its original purpose.

Ted Slafsky – one of the nation’s leading experts on 340B – joined Keith Figlioli for this episode of Healthcare is Hard to unpack this complex and critical program. For 22 years, Ted served as president and CEO of 340B Health, a Washington D.C.-based association of over 1400 hospitals nationwide participating in the 340B program. In 2020, he started 340B Report, the only news outlet in the country focused exclusively on the 340B program.

Some of the topics Ted and Keith discussed include:

• Balancing oversight and operational efficiency. The 340B program faces growing calls for transparency and accountability, with proposals for more detailed reporting on how hospitals and clinics use the savings. While oversight is important to ensure compliance and integrity, Ted warns that excessive administrative requirements could overwhelm providers and divert resources away from patient care. The challenge is finding a balance that promotes trust without creating an operational burden.
• Dispelling Myths. One common misconception about 340B is that it’s a direct patient discount program. Ted addressed this myth, explaining how the discount is intended for providers to give them more resources to reach and serve more patients. The other myth Ted addressed is how the program is described – mostly by the pharmaceutical industry – as a “markup scheme.” He doesn’t think that’s a fair depiction and explained that revenue from commercially insured patients is essential for offsetting the cost of treating uninsured and underinsured patients, making the program a lifeline for safety-net providers.
• An uncertain future. The 340B program faces significant uncertainty as policymakers consider major changes. Recent efforts to replace upfront drug discounts with a rebate model could strain the financial stability of small and rural providers, while federal proposals to cut Medicare Part B reimbursement add further pressure. At the same time, state legislatures are enacting a patchwork of laws to protect providers and restore contract pharmacy discounts, creating complexity across the country. Ted advises providers to not simply hope for the best. He urges hospitals and health centers to engage directly with lawmakers and their staff by inviting them to visit facilities where they can see the program’s impact and its role in supporting vulnerable populations.

To hear Ted and Keith discuss these topics and more, listen to this episode of Healthcare is Hard: A Podcast for Insiders.