Association between 340B contract pharmacy growth and payer-specific drug coverage

The 340B Drug Pricing Program entitles participating hospitals and clinics (called covered entities ) to purchase outpatient drugs at a substantial discount from manufacturers. Covered entities either distribute 340B drugs at reduced prices to patients or generate a subsidy by charging insured patients market prices for discounted drugs. Drugs purchased through 340B accounted for $66 billion in 2023, with approximately one-fifth of this sum coming from sales through unaffiliated community retail pharmacies, called contract pharmacies . We linked data on contract pharmacy locations to Managed Market Surveyor data to describe the markets in which 340B covered entities locate contract pharmacies. We found that the number of contract pharmacies has grown dramatically over the last decade: From 2010 to 2021, the mean share of pharmacies in a county that dispensed 340B drugs increased from 1.5% to 43.7%. Contract pharmacy growth was positively correlated with Medicare and Medicaid coverage and negatively correlated with uninsured and commercial coverage. Although contract pharmacies were positively associated with Medicaid coverage, this relationship was strongest in states that allowed covered entities to dispense 340B drugs to Medicaid patients through a contract pharmacy. Our findings are consistent with those of other studies that covered entities, particularly hospitals, tend to locate contract pharmacies in markets that maximize the 340B subsidy.