How 340B works: follow the drug, the dollars and the data
340B touches drugmakers, wholesalers, hospitals and clinics, pharmacies, insurers and government agencies. Each picture below adds one piece. Pick a step to see who sends what to whom.
In one sentence: drugmakers sell most medicines at a discount to safety-net hospitals and clinics (called covered entities), most insurers still pay their normal rate, and the covered entity uses the difference to care for more patients.
Example numbers are made up to show how the money moves. Real prices and payments vary.
Where the money ends up
Who's who
- Covered entity (CE)
- A hospital or clinic that qualifies for 340B: certain hospitals (based on ownership and how many low-income patients they serve) and clinics that receive specific federal grants, such as community health centers and Ryan White clinics.
- Manufacturer
- The drug company. To have its drugs covered by Medicaid and Medicare Part B, it must offer 340B prices to covered entities.
- Wholesaler
- The distributor that ships drugs from manufacturers to pharmacies and hospitals.
- Contract pharmacy
- An outside pharmacy, like a local drugstore, that fills prescriptions for a covered entity's patients.
- TPA (third-party administrator)
- A software company that checks which prescriptions qualify for 340B and tracks the paperwork.
- HRSA
- The federal agency that runs 340B, registers covered entities and audits them.
- WAC (list price)
- Wholesale acquisition cost: the manufacturer's list price to wholesalers, before discounts. Our example uses $100.
- 340B ceiling price
- The most a covered entity can be charged under 340B. Our example uses $40.
- 340B ESP
- A platform many manufacturers use to collect claims data from covered entities.
- Beacon
- The platform all 10 pilot manufacturers chose to process 340B rebates under HRSA's 2027 pilot. Beacon MFP is a separate product some manufacturers use for Medicare refunds.
- MFP (maximum fair price)
- Medicare's negotiated price for certain high-cost drugs, in effect since January 2026.
- MTF (Medicare Transaction Facilitator)
- CMS's system that sends Medicare MFP claim data to manufacturers and can pass refunds to pharmacies. Pharmacies must enroll.
Educational overview, current as of October 18, 2026. Simplified on purpose: real arrangements vary by covered entity, pharmacy contract, manufacturer and state. The 2027 rebate pilot is scheduled to start January 1, 2027, and is being challenged in court. Not legal advice. Sources: HRSA 340B Drug Pricing Program · HRSA: Medicaid Exclusion File · HRSA 340B Rebate Model Pilot · CMS: Medicare Transaction Facilitator fact sheet · Beacon rebate model FAQ · Merck approved plan · AbbVie approved plan · HRSA program integrity · 340B Health program overview