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What is the 340B drug pricing program?

Also called: 340B, 340B program

The 340B Drug Pricing Program is a U.S. federal program that requires drug manufacturers participating in Medicaid to sell outpatient drugs at discounted prices to eligible safety-net providers, called covered entities, such as certain hospitals and federally qualified health centers. It is administered by HRSA.

By John Britton, VP of Marketing, MedicalProspects · Updated November 4, 2026 · Healthcare Organizations

Why it matters for healthcare sales and marketing

340B affects drug pricing, pharmacy operations and hospital finances. Covered entities and their contract pharmacies buy software and services to manage compliance and savings, and pharma companies track 340B closely in their pricing and access strategy.

How it works

  • Covered entities: eligible hospitals (such as some disproportionate share, children's and critical access hospitals) and certain federal grantees such as federally qualified health centers.
  • Discounts: manufacturers sell covered outpatient drugs to these entities at or below a ceiling price.
  • Contract pharmacies: many covered entities dispense through outside pharmacies.
  • Oversight: HRSA's Office of Pharmacy Affairs; covered entities must prevent duplicate discounts and diversion.
340B flow: drug manufacturer, discounted price, covered entity (eligible hospitals and health centers), patients and contract pharmacies, with HRSA oversight.
340B requires manufacturers to give eligible safety-net providers discounted prices on outpatient drugs.

Example

Illustrative scenario. A pharmacy software company targets pharmacy directors and 340B program managers at covered hospitals and health centers, leading with audit readiness and accurate tracking of eligible prescriptions.

Common mistakes

  • Assuming every hospital participates. Eligibility is specific.
  • Ignoring compliance. Audits and duplicate-discount rules shape buying.
  • Overlooking contract pharmacies. They're part of the 340B workflow.

Related terms

  • Formulary and P&T CommitteeA formulary is the list of drugs a hospital or health plan covers or prefers. The pharmacy and therapeutics (P&T) committee, made up of physicians and pharmacists, decides which drugs are added, removed or restricted.
  • Health SystemA health system is an organization that includes at least one hospital and at least one group of physicians providing comprehensive care, connected through common ownership or joint management.
  • Payer vs ProviderIn healthcare, payers pay for care and providers deliver it. Payers include commercial health plans, Medicare, Medicaid and self-insured employers; providers include hospitals, physician practices, clinics and other care settings.

Put it to work

Sources

  1. 340B Drug Pricing Program, HRSA

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