To become a 340B pharmacy, you must either qualify as a “covered entity” eligible to purchase discounted drugs directly, or partner with an existing covered entity as a contract pharmacy. The 340B program offers drug discounts estimated at 25% to 75% off standard prices, but participation requires meeting strict federal eligibility criteria, registering through HRSA’s online system during specific quarterly windows, and maintaining ongoing compliance.
The path you take depends on what type of organization you are. Here’s how both routes work.
Who Qualifies as a 340B Covered Entity
The 340B program is limited to specific categories of healthcare organizations that serve vulnerable or underserved populations. You cannot simply apply as a standalone retail pharmacy. HRSA recognizes the following types of covered entities:
- Federally qualified health centers (FQHCs), including Health Center Program award recipients, look-alikes, Native Hawaiian health centers, and tribal and urban Indian health centers
- Hospitals, including disproportionate share hospitals, critical access hospitals, children’s hospitals, free-standing cancer hospitals, rural referral centers, and sole community hospitals
- Ryan White HIV/AIDS Program grantees
- Specialized clinics, including Title X family planning clinics, sexually transmitted disease clinics, tuberculosis clinics, black lung clinics, and comprehensive hemophilia diagnostic treatment centers
If your organization falls into one of these categories, you can register directly as a covered entity and purchase 340B-priced drugs for your outpatient patients. The discounts apply only to drugs dispensed in the outpatient setting, not inpatient care.
The Contract Pharmacy Route
If you’re a retail or independent pharmacy that doesn’t qualify as a covered entity on its own, the contract pharmacy model is your path into the program. A covered entity signs a written agreement with your pharmacy to dispense 340B drugs to its eligible patients. You fill prescriptions for the covered entity’s patients, and the entity purchases those drugs at 340B prices rather than wholesale cost.
This arrangement comes with clear responsibilities on both sides. The covered entity must provide oversight of your operations, audit your pharmacy through an independent firm at least once a year, and maintain records that HRSA can review. Your pharmacy must be registered and listed as active in HRSA’s Office of Pharmacy Affairs Information System (OPAIS) before dispensing any 340B drugs. The written contract should identify all pharmacy locations and all covered entity locations involved.
One important rule: contract pharmacies must “carve out” Medicaid patients, meaning you cannot dispense 340B drugs to Medicaid beneficiaries unless the covered entity has a specific arrangement with the state Medicaid agency to prevent duplicate discounts.
How Registration Works
Whether you’re registering as a covered entity or a contract pharmacy, all registrations go through OPAIS, and the system only opens during four quarterly windows each year: January 1 through 15, April 1 through 15, July 1 through 15, and October 1 through 15. Miss a window and you wait until the next quarter.
For contract pharmacies, the covered entity’s Authorizing Official (AO) submits the registration request during the open period. The AO must complete all required steps within 15 calendar days. If they don’t finish in time, the request is canceled and you start over the following quarter. Once HRSA approves the registration, the contract pharmacy can begin dispensing 340B drugs on the first day of the next quarter.
This means there’s a built-in lag. If you register during the January window and get approved, you start dispensing April 1 at the earliest. Plan accordingly.
Preventing Diversion and Duplicate Discounts
HRSA’s two biggest compliance concerns are diversion and duplicate discounts. Diversion means 340B drugs end up with patients who aren’t eligible, essentially people who aren’t patients of the covered entity. Duplicate discounts happen when a manufacturer provides a 340B price on a drug and the state also collects a Medicaid rebate on that same drug. Federal law explicitly prohibits both.
When a covered entity enrolls in the program, it must tell HRSA whether it will “carve in” or “carve out” Medicaid fee-for-service patients at each site. Carving in means using 340B drugs for Medicaid patients, which requires listing every Medicaid state and billing number with HRSA so the system can prevent manufacturers from paying duplicate rebates. Carving out means purchasing drugs for Medicaid patients through regular channels entirely outside the 340B program. Either approach is allowed, but the covered entity must keep its records accurate and up to date.
Covered entities are required to self-report any compliance violations to HRSA, along with a plan to fix them. If you’re a contract pharmacy, the covered entity bears ultimate responsibility for your compliance, but a violation at your location can jeopardize the entire arrangement.
Technology and Third-Party Administrators
Running a 340B program without specialized software is extremely difficult, especially for contract pharmacy arrangements where you need to track which patients qualify, which prescriptions are eligible for 340B pricing, and how inventory flows between 340B and non-340B stock. Most participants use a third-party administrator (TPA) to manage this.
TPAs provide software platforms that handle inventory management, patient eligibility verification, and claims adjudication. They ensure that drug discounts are accurately captured and applied to the right transactions. For contract pharmacies, a TPA typically serves as the intermediary between your dispensing workflow and the covered entity’s 340B program, flagging eligible claims and preventing non-eligible prescriptions from being purchased at 340B prices. Choosing a reliable TPA is one of the most consequential operational decisions you’ll make, since errors in claim capture directly lead to compliance problems.
Manufacturer Restrictions on Contract Pharmacies
The contract pharmacy landscape has shifted significantly in recent years. Several major drug manufacturers began restricting or refusing 340B-priced shipments to contract pharmacies, arguing that the federal statute doesn’t require them to honor unlimited contract pharmacy arrangements. This triggered a wave of litigation.
In a key ruling, the D.C. Circuit Court found that the 340B statute does not categorically prohibit manufacturers from imposing conditions on contract pharmacy use. The court reasoned that the statute’s silence on contract pharmacy delivery terms “preserves, rather than abrogates, the ability of sellers to impose at least some delivery conditions.” Related cases are still moving through the courts, with one appealed to the Fourth Circuit in January 2025.
For practical purposes, this means some manufacturers may limit your access to 340B pricing if you operate as a contract pharmacy, particularly for high-cost specialty drugs. This is an evolving situation, and it’s worth understanding which manufacturers have active restrictions before building your financial projections.
Annual Recertification
Getting into the 340B program isn’t a one-time event. HRSA requires all covered entities to recertify annually, confirming that they still meet eligibility criteria and that their registration information is accurate. The Authorizing Official and Primary Contact both receive email notifications with the recertification window dates.
During recertification, the AO certifies basic information about the entity and its compliance status. Failing to recertify, or certifying inaccurate information, can result in removal from the program. If you’re a contract pharmacy, your continued participation depends entirely on the covered entity maintaining its own standing, so any lapse on their end affects you directly.