A New Era in the 340B Conversation: What Senator Cassidy's New Reform Bill Means for Patients

For more than three decades, the 340B Drug Pricing Program has served as a critical component of America's healthcare safety net. Created by Congress in 1992, the program requires pharmaceutical manufacturers participating in Medicaid to provide discounted outpatient drugs to eligible covered entities so they can "stretch scarce federal resources" and serve more vulnerable patients.

Yet despite its growth into a program generating tens of billions of dollars in annual drug purchases, one fundamental question has remained largely unanswered: Are 340B savings reaching patients?

With the release of the 340B Drug Pricing Integrity and Affordability for Patients Act, Senator Bill Cassidy of Louisiana and chairman of the HELP Committee has introduced what may be the most comprehensive reform proposal in the program's history. The discussion draft seeks to address longstanding concerns regarding transparency, accountability, patient eligibility, contract pharmacy arrangements, and most importantly, whether patients directly benefit from 340B discounts.

For patient advocates, the proposal represents a pivotal moment in the ongoing debate about the future of the 340B program.

Defining a 340B Patient

One of the most important provisions in the legislation is the establishment of a statutory definition of a 340B patient.

For years, the program has operated under guidance rather than a clear congressional definition. The bill would establish explicit requirements linking patients to covered entities through direct care relationships and clinical responsibility. 

Supporters argue that a clear patient definition is essential to maintaining program integrity and preventing inappropriate use of 340B discounts. Critics may view the change as potentially narrowing patient access. Regardless of perspective, codifying patient eligibility would bring significantly more clarity to a program that has long relied on administrative interpretations.

Contract Pharmacies Get a Legislative Framework

Perhaps no aspect of 340B has generated more controversy than contract pharmacies.

The bill would formally authorize contract pharmacy arrangements while imposing significant new guardrails. Covered entities would be required to register contract pharmacies, certify new compliance reporting annually, maintain detailed compliance procedures, and submit contract pharmacy agreements to the Department of Health and Human Services for review.  

The proposal also creates geographic limitations requiring most contract pharmacies to be located within a covered entity's service area, ensuring patients are able to access medications in the same areas they receive care.

For certain hospital covered entities, the legislation would limit participation to no more than five contract pharmacies, excluding mail-order pharmacies from that count. 

Most notably, the legislation establishes escalating penalties for contract pharmacy violations, including financial penalties and potential removal from the program after repeated violations.   

For years, manufacturers have argued that contract pharmacy expansion occurred without congressional authorization. This legislation appears to resolve that debate by explicitly authorizing contract pharmacies while creating a comprehensive oversight structure.

Focused Transparency 

The centerpiece of the legislation is transparency.

For the first time, many covered entities would be required to report detailed information regarding 340B revenue generation, utilization, and expenditures. 

Large hospitals would be required to report:

• The margin generated from 340B drugs.

• The number of patients receiving 340B medications.

• Patient insurance categories.

• Charity care expenditures.

• The percentage of patients benefiting from 340B drugs.

• How 340B-generated margins are spent.   

The bill also requires public reporting by the Department of Health and Human Services, making much of this information searchable and publicly available. 

For years, patient advocates have asked a simple question: How much money does 340B generate, and where does it go? Notably, tax documents like the annual 990 have generally shielded covered entities from specific disclosures.

This proposal is the first major federal effort to answer that question. 

Following the Money

The legislation introduces a formal definition of "margin" generated through the 340B program.

Under the bill, margin would generally be calculated as payments received from patients and third-party payers minus drug acquisition costs and legitimate program administration costs. 

These administrative costs include compliance expenses, legal costs, educational activities, and payments to contract pharmacies or third-party administrators.  

This provision is particularly significant because it moves beyond measuring drug purchases and instead focuses on the financial benefit generated by participation in the program.

That distinction matters.

Understanding margin provides policymakers and patients with a clearer picture of the economic value hospitals and covered entities derive from 340B participation.

Lowering Costs at the Pharmacy Counter

The most transformative provision in the bill may be the creation of direct patient affordability requirements for hospital covered entities.

The legislation would require hospitals participating in 340B to establish sliding-fee scales ensuring that eligible low-income patients pay reduced out-of-pocket costs for 340B drugs. Some federal grantee covered entities are already subject to these types of mechanisms through their grant contract.

Under the proposal:

• Patients below the federal poverty level would pay nothing for covered 340B medications.

• Patients between 100% and 200% of the federal poverty level would pay no more than 20% of their normal cost-sharing obligation or $35, whichever is less.

• Patients above 200% of the federal poverty level would pay no more than 30% of their normal obligation or $50, whichever is less.  

Importantly, these affordability requirements would also apply through contract pharmacy arrangements.  

This provision addresses a longstanding criticism of the program: while manufacturers are required to provide discounts, there has never been a federal requirement that patients directly benefit from those savings.

Why This Matters for Patients

The debate surrounding 340B often focuses on hospitals, manufacturers, pharmacies, and healthcare systems. Lost in many of these discussions are the patients the program was originally designed to help.

For people living with HIV, cancer, diabetes, lupus, and other chronic conditions, prescription drug costs remain a significant barrier to care. Many patients struggle not only with medication costs but also transportation, case management, housing instability, and other social determinants of health.

The transparency provisions in this bill could finally provide evidence regarding whether 340B resources are supporting these services. The affordability provisions could ensure that at least a portion of the program's benefits flow directly to patients at the pharmacy counter.

The Road Ahead

As a discussion draft, this legislation is the beginning—not the end—of the policy conversation.

Hospitals and large covered entities will predictably raise concerns regarding administrative burden, reporting requirements, and contract pharmacy restrictions. Manufacturers may argue the legislation does not go far enough. Patient advocates will carefully examine whether the affordability provisions adequately protect vulnerable populations.

But one reality is increasingly difficult to ignore: a program generating billions in financial benefit cannot remain exempt from transparency and accountability expectations.

The question is no longer whether reform should occur.

The question is whether reforms will strengthen the connection between 340B savings and patient benefit.

Senator Cassidy's proposal represents the most serious congressional attempt to answer that question in decades. While stakeholders will undoubtedly disagree on specific provisions, the legislation succeeds in elevating a principle that should unite everyone involved in the program:

The ultimate measure of 340B's success should not be the size of the discounts generated, but the impact those savings have on the lives of patients.CANN anticipates a House originated bill to be proposed in the coming days and weeks. Keep an eye out for our side-by-side analysis.