Understanding 340B Qualification: A Guide For Hospitals

The 340B Drug Pricing Program, established under Section 340B of the Public Health Service Act, enables eligible hospitals to purchase outpatient drugs at discounted prices. The program aims to help hospitals serving vulnerable communities manage the rising costs of prescription drugs and expand access to vital patient care. To qualify for the 340B program, hospitals must meet specific eligibility criteria as covered entities. This includes ownership requirements, such as being owned and operated by a state or local government, or having a contract with the government to serve low-income individuals not covered by Medicare or Medicaid. Hospitals must also undergo registration and annual recertification to maintain program compliance and prevent duplicate discounts. The 340B program has been a lifeline for hospitals and patients, providing valuable resources to improve healthcare access and advance health equity.

Hospitals must be a covered entity

The 340B Drug Pricing Program has been providing financial help to hospitals serving vulnerable communities for over 30 years. The program enables hospitals to manage rising prescription drug costs and stretch limited federal resources to reduce the price of outpatient pharmaceuticals for patients. The program is a federal drug discount program that requires pharmaceutical manufacturers participating in Medicaid to sell outpatient drugs at discounted prices to healthcare organizations that care for many uninsured and low-income patients.

To qualify for the 340B program, hospitals must be a covered entity and meet eligibility criteria. The definition of "covered entities" includes six categories of hospitals:

• Disproportionate share hospitals (DSHs)
• Children's hospitals and cancer hospitals exempt from the Medicare prospective payment system
• Sole community hospitals
• Rural referral centers
• Critical access hospitals
• Free-standing cancer hospitals

Hospitals in each of these categories must meet one of the three hospital ownership requirements:

• Be owned and operated by a state or local government
• Be a public or private non-profit corporation that a state or local government unit has formally granted governmental powers
• Be a private non-profit hospital with a contract with a state or local government to provide health care services to low-income individuals who are not entitled to benefits under Medicare or Medicaid

Additionally, hospitals must sign a written certification stating that they will no longer purchase outpatient drugs through a group purchasing organization (GPO) arrangement. Covered entities are subject to important restrictions, such as the anti-diversion provision of 340B, which prohibits the resale or transfer of discounted outpatient drugs to individuals who are not patients of the entity. To maintain program compliance, covered entities must also prevent duplicate discounts.

Hospitals must meet ownership requirements

To qualify for the 340B program, hospitals must meet specific ownership requirements. These requirements are in place to ensure that the hospital is a “covered entity” under the program's guidelines.

There are three main ownership criteria that a hospital must meet to be eligible for the 340B program:

• The hospital must be owned and operated by a state or local government. This includes hospitals that are directly owned and operated by a government entity, as well as those that are granted governmental powers by the state or local government.
• The hospital can be a public or private non-profit corporation. In this case, the hospital must be formally granted governmental powers by the state or local government, even though it is not directly owned and operated by the government.
• The hospital can be a private non-profit organization that has a contract with a state or local government to provide healthcare services to low-income individuals who are not eligible for Medicare or Medicaid. These hospitals serve those who are uninsured or underinsured and often cannot afford prescription medications.

By meeting one of these ownership requirements, hospitals can then take the next steps to qualify for the 340B program. This includes registering as a covered entity and agreeing to the program's terms, such as not purchasing outpatient drugs through a group purchasing organization (GPO).

The 340B program is a federal initiative that requires pharmaceutical manufacturers participating in Medicaid to offer discounted outpatient drugs to eligible healthcare organizations. These discounts help hospitals manage rising prescription drug costs and enable them to stretch their resources further. The program specifically targets hospitals serving vulnerable and underserved communities, including critical access hospitals, rural hospitals, children's hospitals, and cancer hospitals.

Hospitals must sign a written certification

To qualify for the 340B Drug Pricing Program, hospitals must meet certain eligibility criteria to be considered a covered entity. The definition of "covered entities" includes six categories of hospitals: disproportionate share hospitals (DSHs), children's hospitals and cancer hospitals exempt from the Medicare prospective payment system, sole community hospitals, rural referral centers, and critical access hospitals.

Hospitals seeking to qualify for the 340B program must sign a written certification stating that they will no longer purchase outpatient drugs through a group purchasing organization (GPO) arrangement. This is a crucial step in the process, as it ensures that the hospital is committed to complying with the requirements of the 340B program. By signing the written certification, the hospital confirms its intention to purchase drugs directly from manufacturers at discounted prices, rather than through a GPO. This allows hospitals to obtain medications at significantly lower costs, enabling them to reinvest the savings into essential care services and community investments.

The written certification is a legally binding document that outlines the rights and responsibilities of the hospital within the 340B program. It serves as a contract between the hospital and the federal government, outlining the terms and conditions of their participation. By signing the certification, the hospital agrees to abide by the program's guidelines, including maintaining program compliance and preventing duplicate discounts and diversion. Additionally, the hospital commits to using the discounted drugs solely for the benefit of their patients and the community they serve.

The process of obtaining and signing the written certification is typically handled by the hospital's administration or legal team. It involves reviewing and understanding the terms and conditions set forth by the 340B program and ensuring that the hospital is able to meet all the requirements. The certification may need to be signed by a hospital's authorizing official or a representative with the appropriate authority to enter into such agreements.

Once the written certification is signed and submitted, the hospital can then proceed with enrolling in the 340B program. This typically involves registering with the Office of Pharmacy Affairs (OPA), which is responsible for reviewing applications and determining final eligibility. The registration process usually occurs quarterly, and during the waiting period, hospitals can establish their 340B policies and procedures, including selecting vendors and implementing necessary software solutions. Overall, the written certification is a critical step in a hospital's journey towards qualifying for the 340B program, enabling them to access discounted medications and provide essential care to vulnerable communities.

Hospitals must register and recertify annually

Annual recertification is required to be completed by the Authorizing Official on the OPAIS website to continue participating in the program. In addition to registration and recertification, the 340B entity must maintain program compliance by preventing duplicate discounts and diversion in the program. The 340B program is a federal drug discount program that requires pharmaceutical manufacturers participating in Medicaid and Medicare Part B programs to contract with the Secretary of Health and Human Services (HHS) to provide specified discounts on covered outpatient drugs purchased by certain "covered entities." These covered entities include disproportionate share hospitals, children's hospitals, rural hospitals, and free-standing cancer hospitals.

Hospitals that qualify for 340B can use 340B-discounted drugs by dispensing them through an outpatient pharmacy or by administering them directly to patients during a clinic visit, in the emergency room, as part of same-day surgery or chemotherapy, or in any other outpatient setting. Hospitals can then use the savings from the 340B program to support essential care services and make investments in their communities. For example, hospitals can use 340B savings to provide free care for uninsured patients, offer free vaccines, provide services in mental health clinics, and implement community health programs.

Hospitals must maintain program compliance

The 340B Drug Pricing Program has been providing financial help to hospitals serving vulnerable communities for over 30 years. The program allows eligible hospitals to purchase certain outpatient drugs at discounted prices. To maintain program compliance, hospitals must meet specific eligibility criteria and prevent duplicate discounts and diversion.

Firstly, hospitals must meet one of the 340B program's hospital ownership requirements:

• Be owned and operated by a state or local government.
• Be a public or private non-profit corporation that a state or local government unit has formally granted governmental powers.
• Be a private non-profit hospital with a contract with a state or local government to provide healthcare services to low-income individuals who are not entitled to benefits under Medicare or Medicaid.

Secondly, the hospital must sign a written certification stating that it will no longer purchase outpatient drugs through a group purchasing organization (GPO) arrangement. This ensures that the hospital is committed to preventing duplicate discounts and diversion.

Thirdly, hospitals must maintain accurate records of healthcare services furnished to patients. This includes identifying the patient, recording the medical evaluation, and documenting the treatment provided. These records are crucial for determining eligibility and ensuring that discounted drugs are not diverted to individuals who are not patients of the covered entity.

Finally, hospitals must register and complete annual recertification on the 340B Office of Pharmacy Affairs Information System (340B OPAIS). The Office of Pharmacy Affairs (OPA) reviews the applications and determines final eligibility. This process allows hospitals to establish their 340B policies and procedures, select vendors, and implement necessary software solutions.

By maintaining program compliance, hospitals can continue to benefit from significant pharmacy savings and support essential care services for their communities.

Frequently asked questions