340B Program Compliance: What Small Clinics Get Wrong and How to Fix It
The 340B Drug Pricing Program allows eligible healthcare organizations to purchase outpatient drugs at significantly reduced prices. For FQHCs, Ryan White-funded clinics, and other covered entities, the savings generated through 340B can be substantial, often representing a meaningful portion of operational revenue when managed effectively.
The program comes with compliance obligations that are not always fully understood by participating organizations. HRSA audits of 340B covered entities consistently identify the same categories of findings, most of which are preventable with appropriate program management.
The Core 340B Compliance Requirements
The 340B program requires that covered entities purchase drugs at 340B pricing only for patients who meet the program's definition of an eligible patient. The eligible patient definition requires that the individual have an established relationship with the covered entity, receive health care services from the entity, and have a medical record maintained by the entity.
Diversion, which means dispensing 340B drugs to patients who do not meet the eligibility criteria, and duplicate discounts, which means billing Medicaid for a drug purchased at the 340B price, are the two most serious compliance violations and the ones most commonly identified in HRSA audits.
Common Compliance Gaps in Small Clinics
The most frequent 340B compliance finding in small covered entities is inadequate patient eligibility documentation. The covered entity must be able to demonstrate, for any 340B purchase, that the patient for whom the drug was dispensed met the eligibility definition at the time of dispensing.
A second common finding is failure to register all contract pharmacy arrangements. If your covered entity uses a contract pharmacy to dispense 340B drugs, each contract pharmacy location must be registered with HRSA in the 340B database.
Third is inadequate internal controls and auditing. The program expects covered entities to conduct annual self-audits and maintain documentation that demonstrates ongoing compliance with program requirements.
Building a Compliance Program
Every 340B-participating organization should have a designated 340B coordinator who owns program compliance, maintains registration records, manages contract pharmacy relationships, and conducts or oversees the annual self-audit.
The self-audit should review a sample of 340B purchases and verify patient eligibility for each. It should also confirm that Medicaid claims for 340B drugs are handled in accordance with the applicable duplicate discount prevention requirements for your state.
What to Do Next
If your clinic participates in 340B and has not conducted a self-audit in the past 12 months, that is the starting point. Pull a sample of 340B purchases from the last quarter and verify patient eligibility documentation for each. What you find will tell you whether your program is operating within compliance requirements.
If you want support building or reviewing your 340B compliance program, our team can help.