Navigating the 340B Maze Amid the Inflation Reduction Act

The intersection of the 340B drug pricing program and the Inflation Reduction Act (IRA) present unique challenges for integrated delivery networks (IDNs) and manufacturers. As the IRA rolls out Maximum Fair Pricing (MFP) negotiations, IDNs and manufacturers will grapple with the financial impacts and administrative burdens of the IRA, particularly for brands subject to an MFP.  

Our 2024 Landscape Update Report – Part Two provides an in-depth look at the potential impact these overlapping programs may have on providers, along with essential considerations for manufacturers. Below are some key highlights.

340B Current State

The 340B Program enables covered entities, including most IDNs, to purchase outpatient drugs at significantly reduced prices. These covered entities may then charge commercial and Medicare payers full price for all 340B discounted drugs. IDNs may also contract with specialty pharmacies to dispense Part D drugs to patients plausibly identified as 340B-eligible.

The enhanced margins generated from this program support IDNs’ margins for oncology and other services.

340 and IRA Future State

When new MFPs are enacted for Part D drugs, brands may be subject to 340B and MFP pricing. Under the IRA, manufacturers must charge Medicare the lower of either the 340B price or the MFP without needing to offer both discounts. However, managing this may be challenging due to the complexities of the programs and manufacturers’ sometimes limited data visibility. Overall, we expect that manufacturers’ risk for paying duplicate discounts is likely to increase.

Impacts and Considerations for IDNs and Community Oncology Practices

• Reduced Buy-and-Bill Margins: IDNs and community oncologists will face reduced buy-and-bill revenue and margins from Medicare for drugs impacted by the IRA’s pricing reforms. Providers will need to make adjustments to oncology operations and payer contracting in response to reduced revenues.
• IDN Margin Advantage: While margins will be reduced, IDNs, as 340B covered entities, will maintain a margin advantage over community oncology practices for dispensing buy-and-bill drugs. This will continue to drive the shift toward IDN-owned oncology services.
• Increased Administrative Burden: The complexities of IRA requirements and 340B require clear solutions. Third-party administrators and pharmacy benefit managers (PBMs) are developing solutions to solve these new data and operational issues.

Looking Ahead for Manufacturers

As the health care industry reacts to changes from IRA, manufacturers should prepare for the following key impacts of overlap between the 340B program and the IRA.  

• Monitor IDNs’ Efforts to Enhance Oncology Margins: The IRA will reduce IDN buy-and-bill margins for select drugs. Manufacturers must understand how providers’ efforts to enhance oncology margins, such as ongoing M&A activity and increased oncology drug management, will impact access for specific brands.
• Proactively Take Steps to Reduce the Risks of Duplicate Discounts: Given the size of the 340B program, duplicate discounts volumes represent a significant risk. Manufacturers must identify and mitigate the risk of duplicate discounts between 340B, MFP, and commercial contracting.  

For an even deeper dive into the expected impact of the IRA, download our 2024 Landscape Update Report – Part Two. I'm also here to answer your questions and would love to hear from you! Send me a note at ebijesse@hmplgobal.com.