What is the Role of 340B Grantees?

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Some federal grant recipients use 340B program eligibility to expand their reach and services provided to a wide range of patient populations.

Avalere previously released a series of insights explaining how the 340B program was established, providing an overview of stakeholders and discussing key 340B trends. In this new series of insights, Avalere will explore additional 340B-related topics including 340B grantees.

Eligible Providers: Who Are 340B Grantees?

Much of the 340B discourse focuses on covered entity (CE) hospitals, which make up more than half of all 340B CEs. However, grantee CEs are a growing component of the drug pricing program (Figure 1). Unlike many 340B hospital CEs, grantees do not have to meet an explicit threshold of underserved patients to be eligible for the 340B Drug Pricing Program. Instead, they qualify on the basis of receiving federal grants or subawards under a federal grant.

Section 340B of the Public Health Service Act (PHSA) states that health centers, AIDS Drug Assistance Programs, Ryan White HIV/AIDS Program providers, and recipients of grants awarded under PHSA Sections 317 (Tuberculosis) and 318 (Sexually Transmitted Disease Prevention) are eligible to enroll in the 340B Drug Discount Program. Sections of the PHSA that authorize the different federal programs specify which entities are eligible to receive grants under each program and for what purpose.

Under Section 318, the Centers for Disease Control and Prevention awards the bulk of the funding to state, territorial, and local governments under three programs (Sexually Transmitted Infections, HIV, and Viral Hepatitis Prevention). Governmental entities frequently make subawards to entities embedded in communities where services may most be needed. The governmental entities that receive funds under Sections 317 and 318 also use grant funds to pay for pamphlets, rapid testing kits, and condoms and provide them as in-kind support to other entities such as hospitals and student health clinics. Recipients of subawards and in-kind support are eligible to participate in the 340B program because they receive 340B-eligible federal grant funds. Subawards and in-kind support are tools prime award recipients can employ to achieve the goals and objectives of the programs. Grantee CEs are governed by a complex and varying web of statutory, regulatory, and subregulatory requirements. These requirements mandate that program income earned as a result of 340B discounts be reinvested into the program to expand and enhance services. It is these requirements that set grantees apart from hospital CEs. Although requirements are in place, the issue of transparency in how program income is used persists.

The 340B program has grown substantially since its inception and following the passage of the Affordable Care Act in 2010, which expanded the 340B program to additional hospital types. From 2012 to 2022 the total number of 340B covered entities grew from 17,491 to 57,372, an increase of 228%. During the same time, the number of 340B grantee participants nearly doubled.

Figure 1. Total Active CEs and Child Sites in the 340B Program by Year
Figure 1. Total Active CEs and Child Sites in the 340B Program by Year

Source: Avalere analysis of HRSA OPAIS data accessed August 2023
Note: This figure includes hospital parent and child sites, grantees, and subgrantees
DSH: Disproportionate Share Hospital

The Role of Grantees and 340B Reform

Calls for 340B reform often point to issues regarding the 340B patient definition, use of 340B-generated savings, and transparency among hospitals, particularly DSH hospitals. A closer look at the statutory and regulatory requirements for federal grant programs can inform approaches to 340B reform. Federal grant programs have different requirements and approaches to ensure low- to $0-cost care for their patients. For example:

  • Participants in the Health Center program have a statutory, income-based sliding fee scale requirement
  • The Ryan White HIV/AIDS Program has a statutory limit on charges to patients
  • All grantee programs prohibit turning individuals away based on their ability to pay for services covered by the direct use of grant funds
  • Grants regulations also stipulate how program income can be used
  • Grantees regularly report data on their grants, individuals served, services provided, and program evaluation and outcomes data to federal agencies

Stakeholders may consider how similar requirements could be adapted or adopted across the 340B program.

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Avalere’s future Insights will describe the interactions between the 340B program and the Inflation Reduction Act and state-level 340B legislative activity.

As policymakers evaluate the status of the 340B program and assess whether reform is needed, stakeholders can prepare by understanding how shifts in policy will impact their business. Avalere’s subject matter experts continue to track ongoing activity at the state and federal level that could influence the broader program landscape. To learn how Avalere can help you qualitatively and quantitatively evaluate the impact of various developments and policy proposals related to 340B, connect with us.

Webinar | Election 2024: What’s at Stake for Healthcare? 

On August 14 at 1:30 PM ET, Avalere experts and guests will discuss the 2024 elections, exploring the candidates’ health policy approaches and implications for stakeholders. 

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