The 340B Drug Pricing Program
To understand the 340B drug pricing program (340B program), one must begin in 1990 when Congress created the Medicaid rebate program to lower the cost of pharmaceuticals reimbursed by state Medicaid agencies. The Medicaid rebate program requires drug companies to enter into a rebate agreement with the Secretary of the Department of Health and Human Services (HHS) as a precondition for coverage of their drugs by Medicaid and Medicare Part B. Under the program, a manufacturer must pay rebates to state Medicaid programs for “covered outpatient drugs,” as defined in the Medicaid rebate statute. The rebate amount for a brand name covered outpatient drug is based in part on the manufacturer’s “best price” for that drug.
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