340B Policy Principles & Priorities

Advocates for Community Health envisions a health care funding structure where the 340B program works exactly as it was designed and enables health centers to invest dollars back into care for vulnerable patients.

Federally qualified health centers (FQHCs) are the linchpin of our nation’s health care safety net, serving as health care homes for nearly 30 million people every year. These characteristics were part of the program’s original design. In order to qualify for section 330 community health center grant funding from the federal government, health centers must commit to serving all individuals in their service area, regardless of insurance status or ability to pay. Part of the health center model is to help connect their patients and community with enabling services and a variety of supports to ensure ongoing access to quality health care, which is often accomplished by providing those services on a sliding fee scale. For millions of Americans every year, their community health center is their lifeline—providing services irrespective of their employment status, insurance status, or current financial situation. While the health center program expanded with investment from the Affordable Care Act, the current reach of community health centers would not be possible without the 340B program.

In today’s health care environment, FQHCs depend on the 340B program to meet their mission, putting every dollar received back into the communities they are serving. Numerous external evaluators have found that payer reimbursement rates consistently fail to cover the cost of the comprehensive services provided in the community health center environment. In fact, when Congress created the program in 1992, they recognized this reality – that the 340B drug pricing program would allow these providers to “stretch scarce federal resources as far as possible, reaching more eligible patients and providing more comprehensive services.” By allowing the purchase of drugs at a discounted price, the 340B program enables health centers to serve more patients, at a higher level of complexity, than they otherwise could.

Effectively, health center use and engagement in the 340B program exemplifies the intent behind its creation: to maximize federal investment and expand care to underserved communities as effectively as possible. 

Our 340B Policy Principles

  • Every dollar generated inside the health center model is, and always should be, reinvested in patient care – including initiatives like medication adherence programs, outreach workers for hard-to-reach populations, and population health projects that improve individual and community health.
  • 340B works when it goes back into care for vulnerable patients – not when it is absorbed into state budgets without any guardrails.
  • As FQHCs move further into value-based care, 340B is an essential part of their ability to succeed. Many FQHCs reinvest 340B savings into medication adherence programs and other interventions that lower costs and keep patients healthier, enabling them to keep overall costs lower.
  • The 340B drug pricing program is not an ancillary service, nor is it a federal program that should be on any chopping block. If we truly value the health and wellbeing of our communities, the 340B program should remain a critical piece of the health care infrastructure in our country.

Our 340B Policy Priorities

The Centers for Medicare & Medicaid Services (CMS) should exempt FQHCs from the actual acquisition cost fee for service Medicaid reimbursement methodology and instill additional guardrails to forced “carve-out” policies.
Rationale: Requiring states to pay actual acquisition cost for 340B drugs defies the intent and proven impact of the program. It also limits FQHCs’ ability to participate and succeed in value-based care.
Recommendation: CMS should update its 2016 outpatient drug rule to clarify that states are permitted to reimburse above actual acquisition cost under fee for service Medicaid for drugs purchased under the 340B program at FQHCs, and provide a federal floor that supersedes state policy.

CMS should clarify that states are not permitted to mandate that Medicaid Managed Care Organizations (MCOs) reimburse for 340B drugs at actual acquisition cost or force providers to carve out.
Rationale: While CMS has not indicated that MCOs must reimburse actual acquisition cost, more states are moving in that direction and/or MCOs are including it as a condition of contracting. 340B savings are an essential part of value-based contracting between FQHCs and MCOs and should not be undermined.
Recommendation: In order to preserve the essential savings provided by the 340B program, CMS and the Health Resources and Services Administration (HRSA) must protect FQHCs against actual acquisition cost and/or forced carve-out policies within Medicaid managed care arrangements.

HRSA should establish new guardrails for manufacturer audits of FQHCs.
Rationale: Pharmaceutical manufacturers often place a high burden on FQHCs to audit 340B drug prescriptions, which often takes away from patient care resources.
Recommendation: HRSA should establish additional requirements around entity burden reduction before approving manufacturer audits of FQHCs.

Committed to community, with a visionary and innovative approach, our membership is leading the way in shaping the rapidly evolving health care landscape of the future. Learn more about our other policy priorities and our advocacy efforts.
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