Georgia Medicare 340B Drug Pricing (2026) Guide

The 340B Drug Pricing Program is one of the most important and most fought-over federal healthcare programs you may have never heard of. Enacted in 1992 as Section 340B of the Public Health Service Act (42 USC 256b), the program requires drug manufacturers who want to sell drugs to Medicaid to also sell those same drugs to "covered entities" (safety-net hospitals, federally qualified health centers, Ryan White HIV grantees, hemophilia treatment centers, and other categories of providers serving low-income and underserved populations) at a heavily discounted "ceiling price."

For Georgia, the 340B program is not abstract policy. It is the financial backbone of Grady Memorial Hospital's charity care program in Atlanta. It funds Phoebe Putney Memorial Hospital's oncology services for uninsured patients across southwest Georgia. It enables Mercy Care and Albany Area Primary Health Care and Curtis V. Cooper to provide medications to uninsured patients at low or no cost. Memorial Health Savannah, AU Medical Center, Atrium Health Floyd, and dozens of rural Critical Access Hospitals and Sole Community Hospitals across Georgia all participate as 340B covered entities, and the program's drug discount savings flow directly into their ability to operate at all.

The program has been under sustained attack. In November 2017 CMS finalized a CY 2018 OPPS rule reducing Medicare Part B reimbursement for 340B-acquired drugs from ASP plus 6 percent to ASP minus 22.5 percent, costing 340B hospitals billions in lost reimbursement. In June 2022 the Supreme Court unanimously ruled in American Hospital Association v Becerra that the reduction was unlawful, ordering CMS to restore the ASP plus 6 percent rate and to remedy the underpayment from 2018 to 2022. Meanwhile, since July 2020, major drug manufacturers (Eli Lilly, Sanofi, AstraZeneca, Novartis, Novo Nordisk, Merck, Boehringer Ingelheim, and others) have unilaterally restricted contract pharmacy access for 340B covered entities, contesting the long-standing HRSA framework that allowed unlimited contract pharmacy arrangements.

This guide explains the 340B framework, who participates, how the ceiling price is calculated, how contract pharmacy works, the manufacturer restrictions, the AHA v Becerra ruling and remedy, and how Georgia hospitals and FQHCs use 340B to deliver safety-net care.

The statute: Section 340B of the Public Health Service Act

Section 340B of the Public Health Service Act, codified at 42 USC 256b, was enacted as part of the Veterans Health Care Act of 1992. The statute creates a drug discount program operated by HHS through HRSA.

The basic structure

Drug manufacturers who participate in the Medicaid Drug Rebate Program (under Section 1927 of the Social Security Act) must, as a condition of Medicaid participation, also enter into a Pharmaceutical Pricing Agreement (PPA) with HHS. Under the PPA, the manufacturer agrees to sell covered outpatient drugs to "covered entities" at no more than the 340B ceiling price.

The PPA is a contract. A manufacturer that fails to comply may be subject to civil monetary penalties under Section 340B(d)(1)(B) and Section 1927(c)(2)(B). A manufacturer that withdraws from the PPA must also withdraw from Medicaid, which makes withdrawal unattractive given Medicaid's size.

Covered outpatient drugs

"Covered outpatient drugs" generally means prescription drugs covered under Section 1927(k)(2). This includes most prescription drugs, but excludes drugs:

• Provided as part of inpatient hospital services (because inpatient drugs are paid under DRG)
• Manufacturer free samples
• Investigational drugs not yet approved
• Drugs with no FDA-approved indication

Ceiling price

Section 340B(a)(1) requires that the price not exceed the "ceiling price," calculated using a specific formula.

Covered entities

Section 340B(a)(4) identifies the eligible covered entity categories. These have expanded over time:

• 1992 statute: FQHCs, Ryan White grantees, hemophilia centers, Title X, others
• 2010 ACA: added CAHs, SCHs, RRCs, children's hospitals, free-standing cancer hospitals
• Ongoing: additional categories considered through legislation

Who is a covered entity? The fifteen-plus categories

The covered entity categories at 42 USC 256b(a)(4) define who can participate. Major categories:

Disproportionate Share Hospitals (DSH)

The largest covered entity category by drug volume. A DSH hospital is a hospital that serves a disproportionate share of low-income patients under Section 1886(d)(5)(F) of the Social Security Act. To qualify for 340B as DSH, the hospital must meet a DSH adjustment percentage threshold (effectively, the hospital must serve high Medicaid populations).

DSH hospitals must also be:

• A 501(c)(3) nonprofit, OR
• Owned by a state or local government, OR
• Operated under formal contract with a state or local government to provide care to indigent populations

Georgia DSH hospitals include Grady, Memorial Savannah, Phoebe Putney, AU Medical Center, Atrium Floyd, Northeast Georgia, Wellstar AMC (until closure), and others.

Critical Access Hospitals (CAH)

A CAH is a small rural hospital meeting specific access criteria under Section 1820 of the Social Security Act. CAHs are eligible for 340B under the ACA expansion.

Sole Community Hospitals (SCH)

An SCH is a hospital that is the only short-term acute care hospital in its service area or that meets specific distance/access criteria under Section 1886(d)(5)(D). Several Georgia rural hospitals qualify.

Rural Referral Centers (RRC)

RRCs are rural hospitals meeting specific case mix and referral criteria. Several Georgia rural hospitals qualify.

Children's Hospitals

Specified children's hospitals, including Children's Healthcare of Atlanta facilities.

Free-Standing Cancer Hospitals

NCI-designated free-standing cancer hospitals.

Federally Qualified Health Centers (FQHC)

FQHCs are Section 330-funded community health centers. They are the second-largest covered entity category by drug volume. Georgia FQHCs participate as 340B covered entities.

FQHC Look-Alikes

FQHC look-alikes meet FQHC requirements but do not receive Section 330 grant funding. They are also 340B covered entities.

Ryan White HIV Grantees

Programs receiving funding under the Ryan White HIV/AIDS Treatment Extension Act. Several Georgia HIV programs participate.

Title X Family Planning

Title X-funded family planning clinics.

Hemophilia Treatment Centers

Federally funded comprehensive hemophilia treatment centers.

Black Lung Clinics, TB Clinics, STD Clinics

Public health programs serving specific patient populations.

Tribal Compact Health Organizations

Tribal 638 organizations under the Indian Self-Determination Act.

Urban Indian Organizations

Urban Indian Health Programs under the Indian Health Care Improvement Act.

How the 340B ceiling price is calculated

The ceiling price formula is at the heart of the program. Section 340B(a)(1)(C) sets out the calculation:

Ceiling Price = Average Manufacturer Price (AMP) - Unit Rebate Amount (URA)

Average Manufacturer Price (AMP)

AMP is defined at Section 1927(k)(1) as the average price paid to the manufacturer by wholesalers for drugs distributed to retail community pharmacies. AMP excludes certain rebates, discounts, prompt-pay discounts, and other adjustments. AMP is calculated quarterly and reported by manufacturers to CMS.

Unit Rebate Amount (URA)

The URA is the rebate the manufacturer would owe Medicaid for the same drug. For brand drugs, the URA is generally:

• The greater of a statutory percentage of AMP, OR
• AMP minus best price (the lowest price the manufacturer charged any other purchaser)

For generics, the URA is a lower statutory percentage of AMP.

Inflation penalty

For brand drugs whose AMP has risen faster than CPI-U since the drug's launch, an inflation penalty is added to the URA. This effectively claws back the price increases that exceeded inflation. For older brand drugs whose prices have risen substantially over CPI-U, the inflation penalty can be very large.

Resulting effective discount

For new brand drugs (no inflation penalty yet), the ceiling price is about 23 percent below AMP, or roughly 23-25 percent below the average wholesale price.

For brand drugs with substantial inflation history (10-20+ years on market with large price increases), the ceiling price can be 40-50 percent below AMP.

For very old brand drugs whose prices have far outpaced inflation, the calculated ceiling price can be zero or theoretically negative. HRSA's policy is to apply "penny pricing" of $0.01 per unit in those cases.

Worked example: ceiling price for a $1,000 brand drug

Assume a brand drug with AMP of $1,000 per unit:

• Base URA (23.1% of AMP): $231
• Inflation penalty (assume $100 for this example): $100
• Total URA: $331
• Ceiling Price: $1,000 - $331 = $669
• Effective discount: 33% off AMP

For older drugs with large inflation penalties, the discount easily reaches 40-50 percent.

The HRSA patient definition

Patient eligibility for 340B-discounted drugs is governed by HRSA's 1996 patient definition. A patient is eligible for 340B-discounted drugs at a covered entity if all of the following are true:

1. The patient has an established relationship with the covered entity. The covered entity maintains records of the patient's healthcare.

2. The patient receives healthcare services from a healthcare professional who is employed by the covered entity or who is providing services under contract or other arrangement. The professional must be sufficiently affiliated with the covered entity that the entity is responsible for the care.

3. The patient receives a healthcare service or range of services from the covered entity that is consistent with the service or range of services for which grant funding or FQHC look-alike status has been provided to the entity. For hospitals (not grant-funded), this is interpreted to mean that the drug must relate to outpatient services rendered by the hospital.

Interpretation and contestation

The patient definition has been subject to ongoing interpretation. Critical points:

• The patient does not need to be low-income (despite the safety-net purpose of the program)
• The patient does not need to be uninsured (Medicare, commercial, and Medicaid patients are all eligible if the other criteria are met)
• The healthcare service must be rendered before the drug is dispensed
• For FQHCs, the drug must be within the Section 330 grant scope
• For hospitals, the drug must relate to outpatient services rendered by the hospital

HRSA proposed comprehensive patient definition revisions in 2015 (the "mega-guidance") but did not finalize them. Manufacturers have argued for narrower patient definitions in litigation. HRSA has consistently reaffirmed the 1996 framework.

The duplicate discount prohibition

Section 340B(a)(5)(A) prohibits manufacturers from being required to provide both a Medicaid rebate AND a 340B discount for the same drug dispensed to the same Medicaid patient. The prohibition prevents "double-dipping."

Carve-in vs carve-out

Covered entities choose between two approaches for Medicaid patients:

Carve-out: The covered entity dispenses commercially acquired drug (not 340B) to Medicaid patients. The state Medicaid program claims the rebate. The covered entity does not benefit from 340B for these patients.

Carve-in: The covered entity dispenses 340B-acquired drug to Medicaid patients. The state Medicaid program does NOT claim the rebate (because the drug was acquired at the 340B price, no rebate is due). The covered entity benefits from 340B savings.

Carve-in requires careful tracking and reporting. The covered entity must:

• Identify Medicaid patients receiving 340B drugs
• Notify the state Medicaid agency of the carve-in election
• Maintain records distinguishing 340B from non-340B drugs

Medicaid Exclusion File

HRSA maintains a Medicaid Exclusion File listing covered entities and their carve-in/carve-out elections for each Medicaid program. Manufacturers and state Medicaid agencies use the file to determine rebate eligibility.

Georgia Medicaid Exclusion File

The Georgia Department of Community Health (DCH) maintains the Georgia-specific Medicaid Exclusion File. Georgia covered entities elect carve-in or carve-out at the program level. Most Georgia FQHCs carve in (gaining 340B benefit). Many Georgia DSH hospitals carve out (allowing the state to claim Medicaid rebate, simplifying compliance).

Medicaid managed care implications

The duplicate discount prohibition originally applied only to fee-for-service Medicaid. The Affordable Care Act extended it to Medicaid managed care. For Georgia Families and Georgia PeachCare for Kids Medicaid managed care, covered entities must coordinate with the MCOs and DCH on carve-in/carve-out elections.

The contract pharmacy framework

In 2010, HRSA issued guidance allowing covered entities to use any number of contract pharmacies to dispense 340B drugs. This dramatically expanded the program because covered entities (many of which did not have in-house pharmacies) could partner with retail pharmacies to dispense drugs to eligible patients.

How contract pharmacy works

1. The covered entity contracts with one or more retail pharmacies (CVS, Walgreens, Walmart, independent pharmacies, etc.).
2. The covered entity purchases the drug at the 340B ceiling price.
3. The drug is dispensed to an eligible patient at the contract pharmacy.
4. The contract pharmacy bills the patient's insurance (commercial, Medicare, Medicaid) at the normal insurance reimbursement rate.
5. The contract pharmacy and covered entity share the spread between insurance reimbursement and 340B acquisition cost (the "340B savings").
6. The contract pharmacy charges the covered entity a dispensing fee.

Replenishment model

Most contract pharmacy arrangements use a "replenishment model" where the pharmacy dispenses from general inventory, then is replenished with 340B-acquired drugs after the fact based on identification of eligible patients. The replenishment is conducted through specialized third-party administrators (TPAs) using software like Verity, Sentry, or PharmaForce.

Growth and importance

By 2020, contract pharmacy had become a substantial share of all 340B drug volume. Many covered entities derive most of their 340B savings from contract pharmacy arrangements rather than in-house pharmacy dispensing. This is particularly true for FQHCs and smaller hospitals that lack in-house outpatient pharmacy infrastructure.

Concerns and criticism

Manufacturers and some policymakers have criticized contract pharmacy growth as exceeding the original scope of 340B. Critics argue that:

• Some contract pharmacy revenue flows to commercial pharmacies (CVS, Walgreens) and TPAs rather than the covered entity
• Contract pharmacy can be used in ways that arguably stretch the patient definition
• Some 340B revenue may not be reinvested in safety-net care

Covered entities and program supporters respond that:

• Contract pharmacy is necessary for FQHCs and smaller covered entities without in-house pharmacies
• Contract pharmacy is the only practical way to reach geographically dispersed patient populations
• Covered entities have substantial discretion under the statute to use 340B savings as they see fit

Manufacturer contract pharmacy restrictions since July 2020

Beginning in July 2020, drug manufacturers began unilaterally restricting contract pharmacy access for 340B covered entities, contesting the HRSA contract pharmacy framework.

Eli Lilly (July 2020)

Eli Lilly was the first major manufacturer to impose contract pharmacy restrictions. Initially Lilly limited contract pharmacy access for Cialis only, requiring covered entities to designate a single contract pharmacy. Lilly subsequently expanded restrictions to additional products.

Sanofi (October 2020)

Sanofi required covered entities to submit detailed claims data through a third-party platform (340B ESP) before extending 340B pricing to contract pharmacies.

AstraZeneca (October 2020)

AstraZeneca limited contract pharmacy access unless the covered entity has an in-house pharmacy. Hospitals without in-house pharmacies were largely cut off from contract pharmacy access for AstraZeneca products.

Novartis (November 2020)

Novartis required 340B ESP claims data submission.

Novo Nordisk (December 2020)

Novo Nordisk limited contract pharmacy to a single designated pharmacy per covered entity. This created particular issues for insulin pricing because Novo Nordisk is a major insulin manufacturer.

Boehringer Ingelheim (August 2021)

Boehringer required 340B ESP claims data.

Merck (July 2021)

Merck restricted contract pharmacy access.

United Therapeutics (August 2021)

United Therapeutics restricted contract pharmacy access for pulmonary hypertension drugs.

Bristol-Myers Squibb (May 2022)

BMS restricted contract pharmacy access.

Other manufacturers

Additional manufacturers have imposed various restrictions, with the trend continuing through 2026.

HRSA response and litigation

HRSA initially declared the manufacturer restrictions unlawful and issued enforcement letters. HRSA referred several manufacturers to HHS OIG for civil monetary penalties. Manufacturers sued, and the litigation has produced mixed outcomes:

• Sanofi v Becerra: District Court for D.N.J. and Third Circuit ruled on aspects of Sanofi's restrictions. Some restrictions upheld; some elements remain contested.
• Eli Lilly v Becerra: Litigation in S.D. Ind. and Seventh Circuit. Mixed outcomes.
• AstraZeneca v Becerra: Litigation in D. Del. and Third Circuit.
• Novartis v Becerra: Litigation in D.D.C. and D.C. Circuit.

The state of manufacturer restrictions continues to evolve. As of 2026, most major manufacturers maintain some form of contract pharmacy restriction, with covered entities adapting through in-house pharmacy expansion and selective contract pharmacy arrangements.

Impact on Georgia covered entities

Georgia hospitals and FQHCs have experienced material revenue reductions from contract pharmacy restrictions. Specific impacts:

• Rural Georgia CAHs and SCHs without in-house outpatient pharmacies have lost the most because they rely most heavily on contract pharmacy
• Georgia FQHCs have been forced to expand in-house pharmacy operations or accept reduced contract pharmacy access
• Major DSH hospitals like Grady have larger in-house pharmacy infrastructure and have been somewhat less affected
• The aggregate revenue impact on Georgia safety-net providers from contract pharmacy restrictions is estimated in the tens of millions of dollars annually

Medicare Part B reimbursement for 340B drugs: history and AHA v Becerra

Original framework: ASP plus 6 percent

Section 1847A of the Social Security Act establishes the Medicare Part B drug reimbursement methodology. For physician-administered drugs (Part B-covered drugs), Medicare pays Average Sales Price (ASP) plus 6 percent.

ASP is a price benchmark calculated from manufacturer sales data, generally close to or below average wholesale price for most drugs. ASP plus 6 percent provides a margin to cover the practice's cost of acquiring and storing the drug.

CY 2018 OPPS reduction

In November 2017, CMS finalized the CY 2018 OPPS Final Rule. The rule reduced Medicare Part B reimbursement for 340B-acquired drugs (when furnished at non-rural DSH hospital outpatient settings) from ASP plus 6 percent to ASP minus 22.5 percent.

The reduction took effect January 1, 2018. 340B hospitals immediately experienced significant revenue reductions on Part B drug reimbursement.

The reduction was implemented at 42 CFR 419.43(c). It applied to most 340B-acquired drugs furnished at non-rural DSH hospitals. Rural SCHs, CAHs, and PPS-exempt cancer hospitals were exempted from the reduction.

Litigation: 2018-2022

The American Hospital Association and several hospitals immediately challenged the CY 2018 reduction in federal court. The case was AHA v Azar, then AHA v Becerra after the administration change.

The District Court for D.C. ruled for the hospitals. The D.C. Circuit reversed, finding that HHS had statutory authority for the variable rate. The Supreme Court granted certiorari.

Supreme Court ruling (June 15, 2022)

In American Hospital Association v Becerra (2022), the Supreme Court unanimously held that HHS lacked statutory authority for the CY 2018 reduction. Justice Kavanaugh wrote for a unanimous Court:

The statute (Section 1833(t)) requires that HHS either (1) conduct a survey of acquisition costs and adjust based on the survey, or (2) use ASP data and pay all hospitals at the same rate. HHS did neither for 340B vs non-340B distinction. The Court held that HHS could not selectively reduce payment for 340B hospitals based on GAO estimates of acquisition cost differences.

The Court vacated the CY 2018 reduction and required CMS to address the resulting underpayment.

Prospective remedy (December 2022)

Effective for CY 2023, CMS restored ASP plus 6 percent prospective payment for 340B drugs at all hospital outpatient departments.

Retrospective remedy: CY 2024 OPPS rulemaking

The bigger issue was the underpayment from CY 2018-CY 2022. CMS finalized the remedy in CY 2024 OPPS rulemaking (CMS-1786-FC):

Lump-sum payment to 340B hospitals: Each 340B hospital that experienced underpayment receives a lump-sum payment equal to its actual underpayment from CY 2018-CY 2022. Payments began in 2024.

Budget-neutrality offset: To maintain Medicare budget neutrality, CMS implemented a prospective offset reducing payments for non-drug services at all hospitals (340B and non-340B).

Continuing litigation: Some non-340B hospitals have challenged the budget-neutrality offset, arguing that they should not bear the cost of the prior unlawful reduction. Litigation continues.

Impact on Georgia 340B hospitals

Georgia 340B DSH hospitals received material lump-sum payments under the CY 2024 remedy. Estimates for individual hospitals:

• Grady Memorial Hospital: estimated $20+ million
• Memorial Health Savannah: estimated $10-15 million
• Phoebe Putney: estimated $5-10 million
• AU Medical Center: estimated $5-10 million
• Atrium Health Floyd: estimated $5-10 million

The exact amounts depend on each hospital's actual 340B drug volume during the affected period. The lump-sum payments have been important to Georgia 340B hospitals' financial recovery from the 2018-2022 underpayment.

HRSA audit activity

HRSA conducts annual audits of covered entities and manufacturers. Audit findings are published on the HRSA website.

Patient definition violations

The most common audit finding category. HRSA samples drug dispensings and verifies that each dispensed drug was provided to a patient meeting the three-prong patient definition. Findings include:

• Drugs dispensed without documented healthcare service
• Drugs dispensed to patients with no established relationship
• Drugs dispensed outside the covered entity's scope (most common for FQHCs)

Material findings result in repayment to affected manufacturers and corrective action.

Duplicate discount violations

Auditors verify that Medicaid drugs are properly handled under the carve-in/carve-out election. Common findings:

• Drugs subject to Medicaid rebate that were claimed under 340B
• Failure to update Medicaid Exclusion File entries
• Incorrect identification of Medicaid managed care patients

GPO prohibition violations

Hospital covered entities (not FQHCs) face a GPO prohibition under 42 USC 256b(a)(4)(L)(iii). The prohibition prevents these hospitals from using Group Purchasing Organizations for covered outpatient drugs at their primary outpatient facilities. The rationale is that hospitals participating in 340B should not also receive GPO discounts on the same drugs.

Audit findings of GPO prohibition violations require corrective action.

Diversion violations

Diversion is the dispensing of 340B drugs to ineligible patients (not meeting the patient definition). The clearest cases involve dispensing 340B drugs through retail commercial channels with no relationship to the covered entity. Repayment to manufacturers is required.

Self-disclosure

Covered entities can self-disclose 340B violations to HRSA. Self-disclosure can mitigate consequences but typically still requires repayment to affected manufacturers.

OPAIS database

The Office of Pharmacy Affairs Information System (OPAIS) at https://340bopais.hrsa.gov is HRSA's covered entity registry. OPAIS tracks:

• Every covered entity (340B ID, name, address, type, status)
• Each covered entity's contract pharmacies
• Each covered entity's child sites
• Medicaid Exclusion File entries
• Covered entity recertification status

Manufacturers verify covered entity status through OPAIS before extending 340B pricing. Covered entities update OPAIS quarterly with any changes. Annual recertification is required.

Recertification

Covered entities must recertify annually that they continue to meet covered entity eligibility criteria. Failure to recertify results in loss of 340B status.

Child sites

Hospital covered entities can register "child sites" (outpatient departments and clinics) that share the parent's 340B ID. Each child site must be:

• Part of the hospital's Medicare cost report
• An integral part of the hospital
• Listed in OPAIS

The child site framework allows hospital outpatient clinics to participate in 340B without separate covered entity status. This has been the subject of audit attention because expansion of child sites can stretch the 340B program scope.

Inflation Reduction Act interaction

The Inflation Reduction Act of 2022 (IRA) created the Medicare Drug Price Negotiation Program at Section 1191-1198 of the Social Security Act. Under the program:

• HHS negotiates a "Maximum Fair Price" (MFP) for certain high-cost Medicare-covered drugs
• The first 10 Part D drugs negotiated took effect in 2026
• Part B drugs are negotiated starting 2028
• Each year additional drugs are added to the negotiation list

The "lesser of" rule for 340B

For drugs subject to MFP negotiation that are also 340B-eligible, the IRA establishes a "lesser of" rule. The 340B covered entity pays the lesser of:

• The 340B ceiling price, OR
• The MFP

For drugs where the MFP is below the 340B ceiling price (common for older brand drugs with substantial inflation penalties already pricing them well below MFP), the 340B price applies.

For drugs where the 340B ceiling price is below MFP (uncommon but possible for newer brands), the 340B price applies.

In practice, 340B and MFP are mostly complementary because the 340B ceiling price for older drugs with inflation penalties is typically well below any negotiated MFP.

Operational mechanics

The exact operational mechanics for "lesser of" pricing continue to be refined through CMS and HRSA guidance. Manufacturers, covered entities, wholesalers, and TPAs must coordinate to ensure proper pricing.

Georgia 340B covered entities

Georgia has approximately 100+ 340B covered entities across multiple categories. Major participants:

DSH hospitals

• Grady Memorial Hospital (Atlanta): Georgia's largest 340B hospital. Public hospital, level 1 trauma center, safety-net mission. 340B savings are substantial and fund significant charity care.
• Memorial Health Savannah: DSH covered entity affiliated with HCA Healthcare.
• Phoebe Putney Memorial Hospital (Albany): DSH covered entity, largest hospital in southwest Georgia. Operates regional cancer center funded substantially by 340B.
• AU Medical Center (Augusta): Augusta University academic medical center. DSH covered entity.
• Atrium Health Floyd (Rome): DSH covered entity, part of Atrium Health (Advocate Health).
• Northeast Georgia Medical Center (Gainesville): DSH covered entity.
• Piedmont Atlanta: Variable DSH status depending on year.
• Wellstar Atlanta Medical Center: Was a DSH hospital and 340B covered entity until closure in 2022.
• Emory University Hospital Midtown: Variable DSH status.

Critical Access Hospitals

Approximately 30 Georgia rural CAHs are eligible for 340B. Many participate.

Sole Community Hospitals and Rural Referral Centers

Several Georgia rural hospitals carry SCH or RRC designation and participate in 340B.

Federally Qualified Health Centers

• Mercy Care (Atlanta area): One of largest Georgia FQHCs. 340B participant.
• Albany Area Primary Health Care: Southwest Georgia FQHC.
• Curtis V. Cooper Primary Health Care (Savannah): Coastal Georgia FQHC.
• Tift County Family Connection: South Georgia FQHC.
• South Central Primary Care (Bainbridge): Southwest Georgia FQHC.
• Center for Pan Asian Community Services (Atlanta): Asian-American population FQHC.
• MedLink Georgia (Northeast Georgia): Rural FQHC.
• Diversity Health Center (Macon area): Middle Georgia FQHC.
• First Choice Primary Care (Macon): Middle Georgia FQHC.
• Approximately 35+ FQHCs and FQHC look-alikes total participate in Georgia.

Georgia children's hospitals

• Children's Healthcare of Atlanta facilities: 340B covered entities.

Ryan White HIV Programs

• AID Atlanta: Ryan White HIV grantee, 340B participant.
• AIDS Survival Project: Ryan White HIV grantee.
• Multiple HIV programs at Emory, Grady, Morehouse: Ryan White participants.

Georgia hemophilia treatment centers

Specialty hemophilia treatment centers at major Georgia academic medical centers.

Worked example 1: Grady Memorial Hospital 340B savings

Grady Memorial Hospital is the largest 340B hospital in Georgia and one of the largest in the Southeast. As a DSH covered entity:

Drug acquisition: Grady purchases covered outpatient drugs at 340B ceiling prices. For high-cost specialty drugs (oncology, HIV, rheumatology, hepatitis C, hematology), the 340B ceiling price can be 30-50 percent below ASP.

Annual 340B savings: Substantial, representing the difference between what Grady would have paid commercially and what it pays at 340B ceiling prices.

Use of savings: As a public safety-net hospital, Grady reinvests 340B savings in:

• Charity care for uninsured patients
• Sliding-scale services
• Outreach programs
• Specialty services that would otherwise be financially unsustainable
• Capital improvements

Impact of AHA v Becerra: Grady was significantly affected by the CY 2018-CY 2022 reduction and received a substantial lump-sum remedy payment.

Contract pharmacy footprint: Grady has both in-house pharmacy and contract pharmacy arrangements. Manufacturer restrictions have affected revenue but have been partially offset by in-house pharmacy capacity.

Worked example 2: Phoebe Putney rural DSH oncology program

Phoebe Putney Memorial Hospital in Albany is the largest hospital in southwest Georgia and a DSH covered entity. Phoebe operates the Phoebe Cancer Center, a comprehensive regional oncology program.

340B drug acquisition for oncology: Modern oncology relies heavily on physician-administered drugs (chemotherapy, monoclonal antibodies, immunotherapy). These drugs are extremely expensive, often $10,000-$30,000+ per dose. 340B ceiling prices for these drugs can be 25-50 percent below commercial.

Funding charity care for cancer patients: Phoebe uses 340B savings to provide free or sliding-scale care for uninsured cancer patients in southwest Georgia. Many patients drive hours from rural counties to access Phoebe's cancer services.

Impact of contract pharmacy restrictions: For drugs dispensed through outpatient infusion (most oncology drugs), in-house pharmacy is typical and contract pharmacy restrictions have less direct impact. For oral oncology drugs and supportive care drugs dispensed through retail pharmacies, contract pharmacy restrictions have had more impact.

Worked example 3: Mercy Care FQHC medication-assisted treatment

Mercy Care is one of the largest Georgia FQHCs. Headquartered in Atlanta, Mercy Care provides comprehensive primary care, behavioral health, and addiction medicine services to low-income patients including a substantial homeless population.

Medication-Assisted Treatment (MAT) for opioid use disorder: Mercy Care provides MAT using buprenorphine/naloxone (Suboxone). Buprenorphine/naloxone is expensive at commercial prices but available at 340B ceiling prices.

340B savings flow to patient access: Mercy Care uses 340B savings to provide MAT to patients regardless of insurance status. Many MAT patients are uninsured or have only sliding-scale FQHC coverage.

Contract pharmacy importance: As an FQHC, Mercy Care relies on a network of contract pharmacies to dispense oral medications including buprenorphine/naloxone. Manufacturer contract pharmacy restrictions have affected this access.

Worked example 4: Manufacturer contract pharmacy restriction impact

A Georgia rural Critical Access Hospital (CAH), call it "Mercer County Hospital" (illustrative), historically dispensed 340B drugs through a network of 8 regional retail pharmacies. The hospital is the only inpatient facility in its rural county.

Pre-2020 arrangement: 340B drugs dispensed at hospital outpatient pharmacy (limited hours, in-house) plus 7 contract pharmacies (CVS, Walgreens, Kroger, two independent pharmacies, two grocery store pharmacies). Patients filled prescriptions wherever convenient and the hospital realized 340B savings on most outpatient prescriptions.

Post-2020 restrictions: Major manufacturers (Eli Lilly, Sanofi, AstraZeneca, Novo Nordisk, Merck) restricted access for the hospital to one contract pharmacy each. Some manufacturers required the hospital to choose between in-house pharmacy and contract pharmacy.

Revenue impact: The hospital estimated lost 340B savings of approximately $400,000-$800,000 annually from the restrictions, depending on which drugs and which manufacturers.

Operational response: The hospital expanded in-house pharmacy hours and worked to redirect patients to in-house dispensing. Patients with limited mobility or transportation faced barriers.

Worked example 5: Critical Access Hospital outpatient infusion

A rural Georgia CAH operates an outpatient infusion center for rheumatology, gastroenterology, and oncology patients. The infusion center serves approximately 200 patients monthly.

340B drug acquisition for infusion: Infusion drugs are expensive (rituximab, infliximab, vedolizumab, ocrelizumab, etc.). 340B ceiling prices substantially reduce the hospital's drug cost.

Financial impact on CAH viability: For many rural CAHs, the infusion center is one of the few outpatient service lines that generates positive margin. The combination of Medicare cost-based reimbursement (CAH framework) plus 340B drug acquisition is critical to making infusion services financially viable in a rural setting.

Continued participation: The CAH continues 340B participation and prioritizes in-house infusion to minimize manufacturer restriction impact.

Worked example 6: AHA v Becerra remedy lump-sum payment

A Georgia DSH hospital (illustrative) received a lump-sum remedy payment of approximately $6 million in 2024 for the CY 2018-CY 2022 Medicare Part B 340B underpayment. The payment was calculated based on the hospital's actual 340B drug claims during the affected period.

Use of payment: The hospital applied the lump-sum payment toward operating budget, addressing accumulated deficits from the underpayment years.

Budget-neutrality offset: The hospital, along with all other hospitals (340B and non-340B), experiences a prospective reduction in non-drug payments. For most 340B hospitals, the lump-sum payment substantially exceeds the prospective offset over time.

Compliance: The remedy required no covered entity action; CMS calculated the underpayment and paid automatically.

Common 340B compliance errors

Error 1: Dispensing 340B drugs without documented healthcare service. The patient must receive a healthcare service from a covered entity professional before the drug is eligible for 340B. Just having a chart with the entity is not enough.

Error 2: Stretching the FQHC scope. FQHCs are limited to drugs related to services within their Section 330 grant scope. Dispensing 340B drugs for non-grant services is diversion.

Error 3: Failing to update Medicaid Exclusion File. Carve-in/carve-out elections must be current. Stale entries can result in duplicate discount violations.

Error 4: GPO usage at hospital outpatient (DSH/SCH/RRC). Hospitals subject to the GPO prohibition cannot use GPOs for covered outpatient drugs at their main outpatient facilities.

Error 5: Missing annual recertification. Failure to recertify results in loss of 340B status until reinstated.

Error 6: Contract pharmacy without HRSA registration. All contract pharmacies must be registered in OPAIS. Unregistered contract pharmacies are not eligible for 340B pricing.

Error 7: Diversion to commercial retail without patient relationship. The clearest violation. 340B drugs dispensed through retail to patients with no relationship to the covered entity.

Error 8: Child site without integration. Hospital child sites must be integral to the hospital and listed on Medicare cost report. Stand-alone facilities that are not properly integrated cannot be child sites.

Error 9: Drug repackaging without compliance. Repackaged 340B drugs must maintain 340B identification. Some repackaging arrangements have been audit-flagged.

Error 10: Manufacturer overcharge not detected. Covered entities should monitor for manufacturer overcharges (price exceeding the ceiling). HRSA has a complaint mechanism but covered entities must surface issues.

Error 11: Inadequate split-billing for inpatient drugs. Inpatient drugs are NOT 340B-eligible (because they're paid under DRG). Covered entities must split-bill outpatient (340B-eligible) from inpatient (not).

Error 12: Failure to track Medicaid managed care. Medicaid managed care drugs are subject to the same duplicate discount prohibition as fee-for-service. Tracking is operationally complex.

Error 13: Mishandling crossover claims. Medicare/Medicaid dual eligible patient claims require careful coordination to avoid duplicate discounting.

Error 14: Lapsed PPA monitoring. A small number of manufacturers occasionally lapse their PPA. Covered entities should monitor for lapsed-PPA manufacturers and avoid attempting 340B purchases.

Hospital and FQHC operations: how 340B actually flows through the system

Understanding 340B in practice requires walking through how the drug actually moves from manufacturer to patient and how money flows back through the system. The operational steps:

Step 1: Manufacturer pricing

The manufacturer publishes the 340B ceiling price to its wholesalers and to the HRSA pricing system. Pricing is updated quarterly based on AMP and URA changes. Manufacturers must be transparent enough that wholesalers can extend the correct 340B price to covered entities.

Step 2: Covered entity ordering

The covered entity orders covered outpatient drugs from authorized wholesalers (typically Cardinal Health, AmerisourceBergen, McKesson, or specialty distributors). The covered entity identifies itself with its 340B ID. The wholesaler verifies covered entity status through OPAIS and extends the 340B price.

Step 3: Drug receipt and inventory

The covered entity receives the drug at 340B pricing. Most covered entities maintain separate inventory tracking for 340B vs non-340B drugs, or use a virtual inventory system through a third-party administrator.

Step 4: Patient encounter

A patient meeting the HRSA patient definition has an encounter with a covered entity healthcare professional. The encounter is documented in the medical record.

Step 5: Prescription or order

The healthcare professional issues a prescription (for outpatient pharmacy dispensing) or an order (for infusion or office administration). The prescription/order identifies the patient, drug, dose, and clinical indication.

Step 6: Dispensing

The drug is dispensed:

• In-house pharmacy: The covered entity's own pharmacy dispenses the 340B-acquired drug.
• Contract pharmacy: The contract pharmacy dispenses, drawing from the covered entity's 340B inventory or under a replenishment model.
• Infusion: The drug is administered in a covered entity outpatient infusion center.
• Office administration: For physician-administered Part B drugs, the drug is administered at the time of service.

Step 7: Billing the payer

The dispensing pharmacy or covered entity bills the patient's insurance (Medicare, Medicaid, commercial, or self-pay) at standard reimbursement rates. The payer does not know (or does not care, for most purposes) that the drug was acquired at 340B pricing.

Step 8: Spread capture

The covered entity (and contract pharmacy, if applicable) captures the spread between insurance reimbursement and 340B acquisition cost. The spread is the "340B savings" that the covered entity uses for its mission.

Step 9: Replenishment (contract pharmacy model)

For contract pharmacy, a typical replenishment model has the contract pharmacy dispense from general inventory, then trigger replenishment with 340B drug after identifying eligible patients in retrospective review. The replenishment is managed by a third-party administrator using specialized software.

Step 10: Ongoing tracking and reporting

The covered entity tracks all 340B drug acquisitions, dispensing, and inventory through specialized software. Tracking supports compliance with patient definition, duplicate discount, and audit requirements.

Third-party administrators (TPAs) and software

The complexity of 340B compliance, particularly with contract pharmacy and replenishment, has spawned a substantial industry of third-party administrators (TPAs) and software vendors. Major TPAs serving 340B covered entities include:

• Verity Solutions: TPA for contract pharmacy management
• Sentry Data Systems (now part of CHC): TPA and analytics platform
• PharmaForce / Apexus: Apexus is HRSA's official prime vendor; PharmaForce is a related analytics offering
• 340B Architects (340Ba): TPA for hospital 340B programs
• Macro Helix (McKesson): TPA platform from McKesson
• Cervey: TPA serving covered entities
• WelltrakRx: TPA for FQHCs

TPAs typically charge a fee based on a percentage of 340B savings managed or a per-prescription dispensing fee. TPA fees can be significant (10-20+ percent of 340B savings in some models), which has been a source of contention about how 340B revenue flows.

Apexus Prime Vendor Program

Apexus is the HRSA-designated Prime Vendor for 340B. The Prime Vendor Program provides:

• Discounted drug pricing (sometimes below the 340B ceiling)
• Educational resources and webinars
• A help desk for covered entities
• Compliance and analytics tools

Covered entities are not required to use Apexus but most participate at least to some extent.

340B program economics

The 340B program has grown substantially since its 1992 enactment. Some key economic facts:

Total program size

The 340B program has grown substantially in covered entity drug purchases since the early 2000s. Growth has come from:

• Expansion of covered entity categories (2010 ACA)
• Contract pharmacy growth (post-2010)
• Drug price inflation (more expensive drugs mean larger absolute discounts)
• Specialty drug growth (high-cost drugs amplify the 340B economics)

Manufacturer financial impact

Manufacturers bear the cost of the 340B discount. The 340B discount can be 30-50 percent of revenue for affected sales. For drugs with high 340B-eligible volume, the financial impact is material.

Covered entity reliance

Many covered entities derive substantial revenue from 340B. For some FQHCs and rural hospitals, 340B revenue exceeds Medicare and Medicaid revenue combined. The program is structurally important to the safety-net delivery system.

Patient cost-sharing

340B does not directly affect patient cost-sharing. Patients pay their normal insurance copays/coinsurance regardless of whether the drug was acquired at 340B. The covered entity (and any contract pharmacy) captures the spread between insurance reimbursement and 340B acquisition.

Policy debate

The program is the subject of ongoing policy debate:

• Critics argue that contract pharmacy growth and patient definition interpretation have stretched the program beyond its original safety-net mission
• Critics argue that some 340B revenue flows to commercial entities (CVS, Walgreens, large hospital systems) rather than charity care
• Supporters argue that 340B is critical to safety-net provider financial viability
• Supporters argue that program scope concerns should be addressed without undermining the basic 340B framework

Federal legislative proposals

Multiple legislative proposals to modify 340B have been introduced. None have been enacted as comprehensive reform. Proposed approaches include:

PROTECT 340B

Proposed legislation to clarify and protect contract pharmacy arrangements in light of manufacturer restrictions.

340B Pharmaceutical Access Bill

Various versions aimed at clarifying or expanding the program.

Modernizing 340B Act

Proposals to add reporting requirements, narrow contract pharmacy, restrict child sites, or modify patient definition.

Hospital DSH Restrictions

Some proposals would tighten DSH hospital eligibility for 340B (e.g., requiring documented charity care levels).

As of 2026, the legislative status of comprehensive 340B reform remains uncertain. Incremental changes through appropriations riders and HRSA guidance continue.

Georgia rural hospital 340B and survival

For Georgia's rural hospitals, 340B program participation can be the difference between operating viability and closure. Several Georgia rural hospitals have closed in recent years due to financial pressures. 340B participation, where possible, has been a partial financial bulwark.

Hospital closures in Georgia

Georgia has experienced more than 10 rural hospital closures since 2010. Closures particularly affected counties in central Georgia, southwest Georgia, and the rural northeast. Each closure removed an inpatient facility from a rural service area, often leaving patients to drive an hour or more for inpatient care.

CAH designation and 340B

For surviving rural hospitals, CAH or SCH designation provides both Medicare cost-based reimbursement and 340B eligibility. The combination of cost-based reimbursement (Medicare CAH framework) and 340B drug acquisition discounts is critical to rural hospital margins.

Outpatient service strategy

For rural hospitals, expansion of outpatient services (infusion, specialty clinics, primary care, behavioral health) where 340B economics are favorable has been a survival strategy. Inpatient services often run at margin loss; outpatient 340B-eligible drug services can subsidize the inpatient mission.

Workforce challenges

Rural hospitals also face severe workforce challenges (physician recruitment, nurse staffing, pharmacist staffing). 340B financial savings can support competitive compensation for rural recruitment.

Rural Emergency Hospital pathway

The 2023-onward Rural Emergency Hospital category allows rural hospitals to drop inpatient services and operate as outpatient/emergency-only with enhanced Medicare payment. Several Georgia rural hospitals have considered conversion. REH status maintains 340B eligibility under the relevant criteria.

Drug categories where 340B matters most

The financial impact of 340B varies by drug category. The categories where 340B has the largest impact:

Oncology drugs

Modern chemotherapy, monoclonal antibodies (rituximab, trastuzumab, bevacizumab, etc.), and immunotherapy agents (pembrolizumab, nivolumab, etc.) are very expensive. 340B ceiling prices substantially reduce cost. Many covered entities derive substantial 340B savings from oncology drug acquisition.

HIV antiretrovirals

HIV antiretroviral drugs are also very expensive. Ryan White grantees and DSH hospitals with significant HIV practice derive substantial 340B savings.

Hepatitis C drugs

Direct-acting antivirals for hepatitis C (sofosbuvir, glecaprevir, etc.) are expensive but curative. 340B-eligible patients with hepatitis C can be treated at substantially lower cost.

Rheumatology biologics

Adalimumab (Humira), etanercept (Enbrel), infliximab (Remicade), and other rheumatology biologics are expensive ongoing therapies. 340B economics are favorable for covered entities with rheumatology practice.

Insulin

Insulin pricing is a particularly visible 340B issue. Novo Nordisk's contract pharmacy restrictions specifically affect insulin access through retail. Many covered entities have shifted to in-house pharmacy dispensing or alternative manufacturer products to maintain access.

Specialty drugs generally

The growth of specialty drugs (high-cost, complex-administration drugs) is concentrated in 340B-eligible therapeutic areas. Specialty drug growth has been a major driver of 340B program growth.

MAT (Medication-Assisted Treatment)

Buprenorphine/naloxone for opioid use disorder is a key 340B drug for FQHCs and other behavioral health covered entities. Access affects MAT availability for low-income patients with opioid use disorder.

Working with Brevy and Georgia resources

Brevy publishes regularly updated guides at brevy.com on Medicare drug coverage, Medicaid, safety-net providers, and related topics. We do not provide legal, compliance, or tax advice. We provide research-grade content explaining the framework so that Georgia hospitals, FQHCs, providers, and beneficiaries can understand the program.

For 340B program operational questions, contact HRSA Office of Pharmacy Affairs at 301-594-4353 or the Apexus Prime Vendor Program at 1-888-340-2787. For Medicare drug coverage questions, contact Medicare at 1-800-MEDICARE or GeorgiaCares SHIP at 1-866-552-4464.

For legal compliance questions, work with 340B-experienced healthcare counsel. Major firms with 340B practice areas can advise on covered entity eligibility, patient definition compliance, audit defense, manufacturer disputes, and contract pharmacy arrangements.

Disclaimers

This article is for educational purposes only and does not constitute legal, compliance, tax, or medical advice. The 340B program is subject to change through HRSA guidance, litigation, and federal rulemaking. The information in this article reflects rules in effect as of May 2026. Always verify current rules at hrsa.gov, 340bopais.hrsa.gov, and through current HRSA guidance before making compliance decisions.

Brevy is not affiliated with HRSA, HHS, CMS, Apexus, or any drug manufacturer or covered entity. Brevy is an eldercare research and information company. We accept no compensation from insurance carriers, drug manufacturers, healthcare providers, or other parties.

Information about Georgia hospitals, FQHCs, and other covered entities reflects publicly available information as of the publication date. 340B program participation, contract pharmacy arrangements, and operational details may change. Verify current information with the relevant organization before relying on it.

This article was researched and written by the Brevy Care Team and is pending final editorial review.

Learn More

• Georgia Medicare Part B drug payment
• Georgia Medicare outpatient hospital benefit
• Georgia Medicare drug price negotiation
• Georgia Medicaid drug rebate program
• Georgia Medicare disproportionate share hospital payments
• Georgia Medicare critical access hospitals

Find personalized help understanding 340B drug pricing and Medicare coverage in Georgia at brevy.com.

The information on Brevy.com is for educational purposes only and is not a substitute for professional legal, financial, or medical advice. Rules vary by state and program and change frequently. Always verify with the relevant agency or a qualified professional. Brevy is not a law firm, financial advisor, or healthcare provider.