The federal 340B Drug Pricing Program (340B) allows certain eligible entities that serve low-income patients to purchase discounted outpatient drugs from manufacturers that participate in Medicaid and Medicare Part B. Manufacturers must sell covered outpatient drugs at 340B prices to these entities. The difference between the cost of the drugs and the amount paid by insurance enables covered entities to use federal resources to improve accessibility and provide more comprehensive services, particularly in rural, low-income, and medically underserved areas.
Program Overview
Section 602 of the Veterans Health Care Act of 1992 added Section 340B of the Public Health Service Act. Under 340B, entities receive a 20.0 to 50.0 percent discount on the average manufacturer price of outpatient prescription drugs.
The covered entities may generate revenue under 340B if patients’ insurance reimbursements exceed the 340B price. Federal statutes do not restrict how covered entities may use this revenue. A survey by the Medicare Payment Advisory Commission, a group representing safety-net hospitals, showed that covered entities use the revenue to reduce patients’ drug costs, provide uncompensated care, and maintain broader hospital operations, among other things. The Health Resources and Services Administration (HRSA) Bureau of Primary Health Care, however, requires a federally qualified health center (FQHC) to use 340B discounts for community benefits to fulfill grant requirements and remain a covered entity.
According to the Office of Pharmacy Affairs within the Health Resources and Services Administration (HRSA OPA), which administers the 340B Program on behalf of the U.S. Department of Health and Human Services (HHS), the discounts enable covered entities “to stretch scarce federal resources as far as possible” to fund safety-net care.
While both the 340B Program and the Medicaid Drug Rebate Program offer rebates to states, states cannot order “duplicate discounts” or stack rebates on prescription drugs.
Eligible Entities
Section 340B(a)(4) of the Public Health Service Act specifies the entities that are eligible to participate in 340B. These include qualifying hospitals, FQHCs, and specialized clinics. Entities are not allowed to divert drugs purchased at the 340B price to an individual who is not a patient of the entity.
Contract Pharmacies
Some covered entities enter into agreements with non-affiliated retail pharmacies, known as contract pharmacies, to provide services to patients. Contract pharmacies are not included in the federal 340B enacting statute. However, in 2001, HRSA created Alternative Methods Demonstration Projects (AMDP), which allow certain covered entities to contract with retail pharmacies. This allowed entities without in-house pharmacies to dispense medications under 340B. In 2010, HRSA expanded 340B to allow covered entities to contract with multiple pharmacies without going through the AMDP process.
Covered Entities in Kansas
As of September 2025, there are 565 unique covered entities in Kansas, according to HRSA’s 340B Office of Pharmacy Affairs Information System (340B OPAIS). These entities account for a total of 963 registered sites, including child sites such as affiliated clinics and outpatient facilities.
While Disproportionate Share Hospitals (DSH) make up less than 1.0 percent of all unique entities, they account for over 25.0 percent of all registered sites.
Disproportionate Share Hospital. DSH facilities are general acute care hospitals that serve a disproportionate number of low-income patients and automatically qualify for 340B annually if they provide enough inpatient services to Medicaid and low-income Medicare beneficiaries.
Critical Access Hospital (CAH). CAHs are designated by the Centers for Medicare and Medicaid Services (CMS). The CAH designation aims to reduce the financial vulnerability of rural hospitals and enhance health care access by maintaining essential services in rural communities.
Sexually Transmitted Disease Clinics. STD clinics are non-hospital facilities that diagnose and treat STDs. These clinics are supported by the STD Control Program overseen by the Centers for Disease Control and Prevention.
Updates and Developments
HRSA-funded Health Centers
On July 31, 2025, HRSA announced new award terms requiring health centers to offer insulin and injectable epinephrine to low-income patients at or below the centers’ 340B acquisition cost. The agency stated the change is aimed at lowering out-of-pocket costs for these medications. The change aligns with Executive Order 14273, Lowering Drug Prices by Once Again Putting Americans First. Health centers are expected to implement the new terms immediately.
340B Rebate Model Pilot Program
In August 2025, HRSA announced the launch of a voluntary 340B Rebate Model Pilot Program to test an alternative to the traditional upfront discount system under the 340B Drug Pricing Program. In this pilot, participating drug manufacturers will provide post-sale rebates to covered entities instead of upfront discounts.
The pilot targets drugs included on the Medicare Drug Price Negotiation Program’s Selected Drug List for the 2026 applicability year. Manufacturers with agreements under this program must submit plans to HRSA by September 15, 2025, with approvals expected by October 15, 2025. Implementation will begin January 1, 2026, and continue for at least one year.
Key requirements include:
- Manufacturers must bear all administrative and data submission costs;
- Covered entities must receive at least 60 days’ advance notice before implementation;
- Data on dispensed drugs can be submitted within 45 days of dispensing;
- Rebates must be paid within 10 days of data receipt; and
- Information technology (IT) systems used must be secure and comply with HIPAA privacy standards.
Limited to selected drugs and manufacturers initially, the pilot program will help HRSA evaluate the rebate model’s effectiveness and inform the development of a formal process for approving future 340B pricing models that comply with the 340B statute and the Administration’s goals.
Recent Kansas Legislation
2025 SB 284 was introduced by the Senate Committee on Federal and State Affairs. The bill would enact the Defense of Drug Delivery Act. Specifically, the bill would prohibit drug manufacturers; third-party logistics providers; repackagers; and an agents, contractors, or affiliates from limiting or interfering with the acquisition or delivery of 340B drugs to covered entities, unless required by federal or state law. It would also prohibit manufacturers from requesting health information or other data as a condition of access to 340B drugs, unless required by law.
The bill would authorize the Attorney General to adopt rules and regulations, administer the newly created Defense of Drug Delivery Fund, and impose civil penalties of up to $50,000 per violation, with each package of 340B drugs considered a separate violation. The State Board of Pharmacy would be authorized to investigate complaints and impose discipline, suspension, or revocation of the registration or permit of such person or entity.
The Senate Committee on Financial Institutions and Insurance amended the bill to clarify that wholesalers and virtual wholesalers are not among the entities prohibited from limiting 340B drug delivery but may be investigated if they possess evidence relevant to a complaint.
Active Covered Entities in Kansas
| Entity Type | Unique Covered Entities | Total Registered Sites |
| Disproportionate Share Hospital (DSH) | 5 | 245 |
| Critical Access Hospital (CAH) | 78 | 194 |
| Sexually Transmitted Diseases (STD) | 164 | 164 |
| Tuberculosis (TB) | 147 | 147 |
| HRSA-funded Health Center (CH) | 103 | 103 |
| Family Planning – Title X (FP) | 54 | 54 |
| Sole Community Hospital (SCH) | 5 | 35 |
| Children’s Hospital (PED) | 1 | 12 |
| Health Center Program Look-Alike (FQHCLA) | 3 | 3 |
| Rural Referral Center (RRC) | 1 | 2 |
| HIV/Viral Hepatitis (HV) | 1 | 1 |
| Ryan White Part C (formerly Title III) (RWII) | 1 | 1 |
| Ryan White Part B (formerly Title II) (RWIIR) | 1 | 1 |
| Urban Indian (UI) Health Center | 1 | 1 |
| Total | 565 | 963 |
Source: HRSA 340B OPAIS data, accessed September 2025.
The bill passed the Senate on emergency final action on March 20, 2025. On March 24, 2025, the bill was referred separately to the House Committees on Interstate Cooperation and Insurance. As of the 2025 Interim, the bill remains in committee and has not yet been considered by the full House. Kansas’ two-year legislative cycle means SB 284 will remain active through the 2026 Session.
U.S. Supreme Court Case
On June 15, 2022, the U.S. Supreme Court ruled in American Hospital Association v. Becerra that the reimbursement payment rates set by HHS for drugs obtained under 340B in calendar years 2018 and 2019 were unlawful. The Court’s decision was based on HHS’s failure to conduct a required survey of hospitals’ acquisition costs before implementing the rates.
By Arianna Waddell and Leighann Thone.
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