Get to Know 340B: Contract Pharmacies

Community health centers rely on contract pharmacies to expand access to medications for their patients. Read on to learn more about restrictions on contract pharmacies.
Health centers purchase outpatient medications at a discount through the federal 340B drug pricing program and invest all savings into patient care.  Savings from the 340B program ensure health centers can provide affordable medications and comprehensive services to all patients, regardless of their ability to pay.
What are contract pharmacies? 
Health centers rely on two different types of pharmacies to ensure their patients have access to medications: in-house pharmacies, and contract pharmacies. In-house pharmacies are pharmacies owned by the health center and usually co-located within the center.1 Contract pharmacies are pharmacies owned by an organization other than the health center and at a separate location.2  
How do health centers use contract pharmacies? 
Many health centers don't operate in-house pharmacies because of the significant resource investments required to start and maintain them. About 56% of health centers in the country have an-house pharmacies.3 Health centers rely on contract pharmacies, whether they are retail chains or independent pharmacies, to expand access for patients because these pharmacies are conveniently located and often offer extended hours.4 According to a study by the National Association of Community Health Centers (NACHC), 86% of community health centers rely on contract pharmacies to expand medication access for their patients.5  
How are drug manufacturers harming contract pharmacies? 
Beginning in August of 2020, several major drug manufacturers started restricting the use of contract pharmacies. Drug manufacturers refused to ship 340B-priced medications to contract pharmacies or made shipments contingent on health centers turning over certain claims data. Reducing or eliminating the use of contract pharmacies will affect medication access patients at health centers regardless of what pharmacies they use. Even health centers with an in-house pharmacy rely on contract pharmacies to expand the reach of affordable medications for their patients- reaching tens to hundreds of zip codes.6 Claims data requests can also be used to further disrupt access to medications as the information can be used by third parties to expand practices that divert 340B savings away from health centers.  
What is the latest news on contract pharmacy restrictions? 
In early 2021, the National Association of Community Health Centers (NACHC) filed a lawsuit against HHS, compelling the agency to institute a long-delayed Administrative Dispute Resolution (ADR) process for health centers to bring petitions against drug manufacturers. Once HHS implemented the ADR process, NACHC filed a petition on behalf of community health centers. Since then, there has been little progress and the process has been mired in litigation. HHS announced it would be re-writing the regulations for the ADR process.  

Five major drug manufacturers are now imposing contract pharmacy restrictions on community health centers and cases continue to be adjudicated in court. However, many of the courts have indicated that it is Congress's responsibility to address the issue of contract pharmacies under the 340B statute.  
What can you do to support 340B? 
Congress has a role to play in protecting the 340B program. There is currently a sign-on letter circulating in the House of Representatives led by Representatives Spanberger, McKinley, Matsui, Johnson, Axne, and Katko calls on HHS to begin fining drug manufacturers who are refusing to ship 340B-priced drugs to contract pharmacies. This letter has a sign on deadline of Thursday, June 23 and is similar to other letters circulated in the House that have had broad bipartisan support.

Please considering reaching out to your House members and asking them to sign-on to the letter: 
[1] NACHC, 2018. NACHC 340B Manual for Health Centers Second Edition. 
[2] Ibid.
[3] National Association of Community Health Centers. (2022). 340B: A Critical Program for Health Centers. Retrieved from
[4] Ibid.
[5] National Association of Community Health Centers. (2022). 340B: A Critical Program for Health Centers. Retrieved from
[6] Ibid.



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