How Community Health Centers can
Successfully Contract with Chain Pharmacies to
Expand Access to Needed Medicine
Kathryn R. Watson*
The 340B Drug Discount Program extends access to affordable outpatient
prescription drugs in the United States.1 Established by Congress in 1992,
the 340B Program seeks to leverage federal dollars by requiring
pharmaceutical manufacturers that enroll in Medicaid to offer their drugs to
eligible safety net providers at a steep discount. Safety net providers eligible
to participate in the 340B Program are statutorily described as “covered
entities.” 2 Community health centers (also known as Federally Qualified
Health Centers) are one type of covered entity. 3 Each type of covered entity
provides health care services to underserved communities or to patients with
medical conditions that are unduly expensive to treat. By saving covered
entities money on the cost of outpatient drugs, the 340B Program allows
covered entities to expand needed health services. However, this comes at a
cost of billions of dollars annually for pharmaceutical manufacturers. Recent
growth in 340B Program participation has triggered a backlash, with
pharmaceutical manufacturers alleging abuse and raising issues before
Congress. 4 In turn, the 340B Program is currently under increasing scrutiny
by the federal government and private industry, as audits of covered entities
are on the rise and Senators are questioning whether the 340B Program is
* JD, MPH, LLM. I would like to thank Michael B. Glomb, Partner at Feldesman Tucker Leifer
Fidell LLP, in particular for his mentorship, insights and encouragement.
1. Section 340B is a section within the Public Health Service Act. 42 U.S. C. § 256b
(2010) [hereinafter § 256b].
2. § 256b(a)( 4).
3. See § 256b(a)( 4)( A) (stating a Federally Qualified Health Center is eligible to register
as a “covered entity”).
4. See Christopher Versace, Congressional Scrutiny Over 340B Program Continues to
Grow, FORBES (Mar. 30, 2015, 5: 20 PM), http://www.forbes.com/sites/chrisversace/2015/03/
30/congressional-scrutiny-over-340b-program-continues-to-grow/ (noting that Congress
recently recognized the need for “reform and transparency” within the 340B Program).