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Contract Pharmacies’ Troubling Role in the 340B Drug Discount Program

Through guidance issued in 2010 by the Health Resources and Services Administration (HRSA), 340B covered entities can have an unlimited number of “contract pharmacy arrangements” in the 340B Drug Discount Program. A 2020 report released by AIR340B, “The Impact of Growth in 340B Contract Pharmacy Arrangements – Six Years Later,” reviews the implications of unlimited contract pharmacy arrangements in detail, and an overview of the issue is provided below.

“Contract pharmacies are a black box inside the already opaque 340B program and researchers and watchdog agencies are only beginning to scratch the surface of the profit-driven financial incentives at play… the only data that exists on whether patients see a benefit from this growing program shows that in the majority of cases, they do not.”

-AIR340B Report, 2020

Contract pharmacy arrangements are often with for-profit pharmacy chains like CVS, Rite-Aid, and Walmart. Since the guidance went into effect 10 years ago, these large chain pharmacies jumped on the opportunity to use the 340B Drug Discount Program for profit,  with the number of those participating in the program increasing from 1,300 to nearly 28,000 – that’s more than 21 times over.

Despite the fact that this safety-net program was created to support nonprofit entities that serve vulnerable or uninsured communities, for-profit corporations have been utilizing the program as a profit-making tool – at the expense of many low-income Americans. This is a huge cause for concern, and multiple government oversight agencies and Congress are not confident these arrangements are benefiting patients. We agree.

Below are key findings from reports that provide troubling evidence that 340B disproportionate share hospitals (DSH) hospitals and contract pharmacies are not improving access to medications or improving health outcomes for low-income Americans.

It’s past time we put patients first. We need to increase oversight of DSH hospitals and arrangements with contract pharmacies to ensure the 340B program cannot be manipulated and so patients benefit.