The 340B Crossroads: Preparing for Reform and Risk

The 340B Crossroads: Preparing for Reform and Risk

The 340B program is in a state of flux. Regulatory actions, legal challenges, and reform pilots have created a high-stakes environment for health systems, one where operational and financial uncertainty is the norm. The recent temporary restraining order on 12/29 and subsequent federal pushback on 12/31 have paused the planned rebate-based reform model, leaving health systems in a holding pattern without clear guidance. But make no mistake: change is coming.

340B savings aren’t just a line item, they’re often a lifeline. For many safety-net hospitals and covered entities, these discounts can represent access to essential services, offset uncompensated care, provide wrap-around community services, and provide savings amidst already slim operating margins. Currently the 340B program operates through two main pathways:

• Hospital Split Billing, which applies to outpatient drugs under the medical benefit and uses software to separate outpatient from inpatient claims to prevent diversion.
• Contract Pharmacy, which allows covered entity patients to fill prescriptions at contracted pharmacies under the pharmacy benefit.

While Split Billing ensures compliance through replenishment rules, the Contract Pharmacy model, expanded under the ACA, has become a major policy flashpoint with regard to its broad use and scope.

What’s on the Horizon

Although temporarily halted, the proposed 340B rebate-based pilot signals major operational and financial shifts for health systems:

• Compressed Timelines: Health systems only had 4–5 months to redesign workflows across supply chain, pharmacy, billing, scheduling, and IT for a one-year pilot.
• Cash Flow Strain: Upfront purchase of drugs at full Wholesale Acquisition Cost (WAC) replaces immediate discounts, with rebates issued later, creating liquidity challenges, especially for safety-net hospitals.
• Contract Pharmacy Limits: Significant reductions in contract pharmacy networks threaten patient access and health system savings, compounded by manufacturer restrictions and pharmacy opt-outs.
• Expanded Reporting: New data platforms (e.g., Beacon), detailed reporting requirements that may vary by manufacturers impact, and Medicaid carve-in/out increases administrative burden.
• Medicaid Complexity: Intersecting policy changes require constant recalibration of eligibility and billing strategies.

Why Manufactures Must Act Now

These shifts don’t just impact health systems, they reshape the manufacturer landscape. Organizations that act early will be best positioned to mitigate risk and seize opportunity. A health system-specific strategy is no longer optional; it’s essential to:

• Align with system priorities like cost containment and population health.
• Navigate contract pharmacy dynamics and rebate timing.
• Build partnerships that deliver measurable value in an increasingly scrutinized environment.

At Petauri Kinect, we help manufacturers decode these complexities and design strategies that resonate with health system decision-makers. Because in today’s market, understanding policy isn’t enough, acting on it is what sets leaders apart. To start a conversation, email info@petauri.com