340B Spotlight: Retail pharmacies continue to expand the 340B program

One area of needed reform in the 340B program is the use of contract pharmacy arrangements. A new analysis by Drug Channels  found more than one-in-four retail, mail and specialty pharmacies in the United States is a participating contract pharmacy. Walgreens remains the biggest player in the contract pharmacy space, as they have the same number of locations as Walmart, CVS, Rite Aid, Kroger and Albertsons combined. 

Sub-regulatory guidance issued in 2010 permits 340B discounts to be shared with for-profit retail “contract” pharmacies.  These pharmacy arrangements were initially piloted to help “community health centers and other 340B safety net providers to develop new ways to improve access to 340B prescription drugs for their patients” without their own in-house pharmacy or those wishing to supplement their in-house pharmacy. Instead, under the Health Resources and Service Administration’s 2010 contract pharmacy guidance, today 340B entities – including large hospitals – are allowed to have an unlimited number of contract pharmacies, even if these pharmacies are not located in places to help expand access or required to pass on benefits to low-income or uninsured patients.

The Drug Channels analysis also notes that it is impossible to determine how many low-income or uninsured patients are directly benefiting from discounted prescriptions purchased at contract pharmacies. Currently, there are no rules regarding how covered entities use revenue from the 340B program, and there is no obligation that patients who cannot afford their medicines receive the 340B discount when they try to fill a prescription at a contract pharmacy. Given the size of the contract pharmacy program and the role of large for-profit pharmacy chains in a program designed for safety-net providers, policymakers should take a fresh look at the contract pharmacy program and its role in the 340B program and distorting the health care market more broadly.