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340C – Prospective Legislation to Protect Federally Qualified Health Centers

Client Alert
November 14, 2022

Advocates for Community Health (ACH), an organization created to implement policy and advocacy initiatives for health care systems across the United States, has begun drafting legislation that is geared towards protecting Federally Qualified Health Centers (“FQHCs”) enrolled in the 340B Program, which is being dubbed “340C.”

The 340C program would be a separate drug discount program just for FQHCs and perhaps other entities such as rural hospitals and federal grantees like Ryan White Clinics as well. According to ACH: “[o]ur members and leadership came to the decision that health centers and the patients they serve must be protected as reforms to the 340B program are under consideration.”[1] The move seems aimed at distinguishing FQHCs and perhaps other federal grantees from hospitals that currently participate in the 340B program and that have drawn the criticism of some lawmakers.

The main goal of ACH is for funds from the 340B program to be reinvested into FQHCs to fully benefit the patients and communities they serve, as the program was originally intended. However, with 340B reform underway on the federal and state levels, ACH wants to make sure FQHCs are protected; “There is no defensible reason to sweep FQHCs into the ‘reform’ of the 340B program, particularly given that health centers are already required to reinvest any program revenue into patient services.”[2]

In particular, ACH lists three policy recommendations specific to FQHCs:

  • The Centers for Medicare & Medicaid Services (CMS) should update its 2016 outpatient drug rule to clarify that states are permitted to reimburse above actual acquisition cost under fee for service Medicaid for drugs purchased under the 340B program at FQHCs, and provide a federal floor that supersedes state policy.
  • In order to preserve the essential savings provided by the 340B program, CMS and the Health Resources and Services Administration (HRSA) must protect FQHCs against actual acquisition cost and/or forced carve-out policies within Medicaid managed care arrangements.
  • HRSA should establish additional requirements around entity burden reduction before approving manufacturer audits of FQHCs.[3]

When and if the legislation is introduced to Congress, we will update this Alert with more specifics as to what exactly the “340C” Program will entail.

If you have any questions about the 340B Program, please reach out to healthcare attorney, Member Daphne Kackloudis at dlkackloudis@bmdllc.com.

[1] Rita Rey, ACH Stands up to Defend the 340B Program for Health Centers, (Oct. 7, 2022) https://advocatesforcommunityhealth.org/ach-stands-up-to-defend-the-340b-program-for-health-centers/. 

[2] Id.

[3] Advocates for Community Health, “340B Policy Principles & Priorities,” https://advocatesforcommunityhealth.org/policy-advocacy/340b/.

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