340B Spotlight: What are contract pharmacy arrangements?

We’ve been covering 340B a lot in recent weeks, including areas of needed reform: how discounts work, levels of charity care among 340B hospitals and the relatively high rate of 340B hospitals acquiring physician practices.

Another aspect of 340B that deserves a closer look is contract pharmacy arrangements. But what are contract pharmacies and how do they work?

Contract pharmacy arrangements enable covered entities to contract with multiple independent retail pharmacies to dispense drugs receiving 340B discounts. The original purpose of these arrangements was to help small clinics who did not have their own in-house pharmacy. But a policy change in 2010 allowed all 340B entities – including large non-profit hospitals – to have an unlimited number of contract pharmacies. This change dramatically increased the number of contract pharmacies, but did nothing to ensure that patients either receive or benefit from the 340B discount. Additionally, even though contract pharmacies were originally created to help small safety net clinics, those are not the entities most likely to benefit from large contract pharmacy networks.

Contract pharmacies in 340B are one of the main drivers of the program’s growth and next week we’ll take a closer look at the growth of these arrangements and what that means for vulnerable patients.

Follow along with 340B Spotlight for the latest.