Calls Grow for Transparency and Clearer Patient Definitions to Protect 340B’s Safety-Net Mission

Shawn Gremminger, president and CEO of the National Alliance of Healthcare Purchaser Coalitions, continued his conversation with Pharmacy Times®, discussing how policymakers and purchasers want greater transparency in the 340B program to understand how much hospitals and covered entities are making and whether funds are reinvested in patient care or low-income communities. He noted that states like Minnesota and Indiana have passed legislation requiring revenue disclosure, with Indiana also mandating reporting on how funds are used. Gremminger emphasized that a major issue in 340B is the lack of a clear patient definition, which allows covered entities to classify individuals as patients after minimal contact, even without prescriptions. This loophole enables drug diversion, allows hospitals to profit without benefiting patients, and disadvantages independent pharmacies outside the 340B network.

Pharmacy Times: Given the lack of requirements for charity care reinvestment for 340B, what transparency reforms are most impactful for the pharmacy sector?

Shawn Gremminger: What I’ve heard policymakers say—and what employers and purchasers also tend to think about 340B—is that they just want to know how much hospitals and other covered entities are making on 340B and what they are doing with those dollars.

The law, as you mentioned, does not have a charity care requirement, but it implicitly suggests that money made from 340B should be used to provide discounts on drugs, offer discounted or free care, or be reinvested in low-income communities. In other words, it should fulfill a safety-net mission. Yet, there are no requirements for covered entities to do that, and there is no reporting to verify whether they are.

We’ve seen a few states pursue transparency legislation along these lines. For example, in Minnesota, the legislature passed significant transparency legislation requiring covered entities to disclose how much money they are making. Entities must report their gross revenue from 340B, then back out all costs—including contract pharmacy operating costs—so we can see the net spread. At least now we know how much each covered entity is making, though it doesn’t go as far as requiring them to explain how they use those dollars.

Indiana recently passed legislation that asks not only how much is being made but also what is being done with the money. While it’s too early for data, that’s exactly the kind of reform we want to see. Pharmacies, particularly independent pharmacies, deserve to know if this program is truly being used to benefit the low-income communities it was intended to support.

Pharmacy Times: How does the weak 340B patient definition enable drug diversion and impact appropriate utilization by contract pharmacies?

Gremminger: This is one of the biggest challenges in 340B. The statute explicitly prohibits drug diversion to a “non-patient” of the covered entity, but it never defines what a patient is.

HRSA has tried several times since the program was created in 1992 to implement stronger definitions, but each time, those attempts have been struck down in court. The result is that 340B has very little regulatory authority over a program that now exceeds $70 billion in spending. That’s a real problem.

Without a clear definition, each covered entity effectively creates its own patient definition. For example, in the recent case Genesis v. HRSA, the court sided with the covered entity, which had broadly interpreted what counts as a patient. Under current case law, any provider that delivers any service to any person can classify that individual as a 340B patient—without a time limit.

Amazingly, the provider doesn’t even need to prescribe a drug. We’ve seen cases where a covered entity conducts a brief telehealth visit, doesn’t prescribe medication, but still records the patient as theirs for up to two years. From then on, every prescription that person fills—whether through the covered entity or another provider—can be claimed under 340B pricing if dispensed at the entity’s pharmacy or a contract pharmacy.

This means hospitals can buy drugs at a discount, resell them at higher prices, and pocket the spread while patients see no benefit. Hospitals may make thousands—or even tens of thousands—of dollars simply because of a single visit years earlier.

It’s absurd. And for pharmacies that are not part of 340B contracts, it means they lose out entirely, as the money is funneled through contract pharmacy arrangements where profits are concentrated.