Growing administrative complexity in the 340B program and the rise of third-party administrators

The 1992 340B drug discount program lowers drug costs and provides a source of revenue for safety-net providers by entitling them to discounts on drugs for all patients, including those with insurance. As 340B has grown so has the administrative complexity of the program, creating a market for third-party administrators (TPAs) to manage both formal and informal requirements in exchange for fees. Although TPAs are playing an important role in the 340B ecosystem, the TPA market is poorly understood, along several dimensions including its size, specialization, competitiveness, and scope of services offered. In this brief report, we report the results of original market research on TPA firms to address unanswered questions and identify gaps in knowledge. We identify 48 TPA firms, including 8 owned by private equity firms, 2 owned by software companies, and 6 owned by a variety of vertically integrated health care stakeholders such as pharmacies, pharmaceutical benefit managers, and pharmaceutical wholesalers. We identified 7 services offered by TPAs including patient discount cards (13), enrollment (31), auditing (45), revenue capture (42), referral management (9), inventory management (19), and 340B ESP assistance (9). Our results suggest that TPAs are involved in many diverse functions related to 340B.