Enacted as part of the Public Health Service Act of 1992, the 340B drug discount program was envisioned as a way to lower drug costs for safety-net healthcare providers (those who serve patients regardless of their insurance status or ability to pay) and provide them with a source of revenue to fund care. Providers participating in 340B can purchase prescription drugs at heavily discounted prices — approximately 50% off the list price. Because the discounted drugs can be used on all patients, the provider can generate revenue when they collect reimbursements from insurers for discounted drugs.

In the past three decades, the 340B program has grown substantially to include more eligible hospitals (known as “covered entities”) and more pharmacies through which 340B drugs can be dispensed. So called “contract” pharmacies dispense discounted drugs to patients in exchange for a fee or a portion of the 340B revenue generated from the prescription. The percentage of U.S. retail pharmacies contracting with covered entities has grown from 1% in 2010 to over 40% by 2022.

A new study adds to the conversation around 340B’s extensive growth by analyzing the ownership of 340B contract pharmacies. Analyzing data from 2009-2022, the researchers described 340B participation among the top four pharmacy chains, as well as grocery chains, smaller pharmacy chains, and independently owned pharmacies. The study finds that the increase in the proportion of retail pharmacies participating in 340B is largely driven by the four largest pharmacy chains. Published in Health Affairs Scholar, the study found:

• In 2022, the total number of pharmacies participating in 340B was 26,885, up from 601 in 2009.
• Of all participating pharmacies in 2022, 70% were owned by the top four chains: 26% were owned by Walgreens, followed by CVS (25%), Walmart (11%), and Rite Aid (8%). Grocery store chain pharmacies accounted for 13%, independent pharmacies were 10%, institutional pharmacies were 5%, and small chains were 2%.
• Among the top four chains (Walmart, CVS, Rite Aid, and Walgreens), 71% of locations held 340B contracts in 2022. By contrast, 41% of institutional pharmacies, 38% of grocery store pharmacies, and 22% of independent pharmacies participated in the program.
• Pharmacies owned by the big four tend to be located farther away from hospitals and other covered entities. The median farthest distance for top-four owned pharmacies was 19 miles from a covered entity, versus only 10 miles for independently owned and institutional pharmacies.

“At the same time that contract pharmacy arrangements are growing among large chains, the number of rural and independent pharmacies that are more likely to serve safety-net reliant patients has been decreasing,” says Claire McGlave, SPH doctoral student and lead author of the study. “As large pharmacy chains benefit from the expansion of 340B, it remains unclear if growth in the program translates to growth in revenue for core safety-net providers that depend on the program. This is especially important as drug manufacturers challenge the legality of 340B discounts and threaten the existence of the program due to its rapid growth.”

The researchers noted that a 340B contract pharmacy market dominated by a handful of the largest pharmacy chains in the country could have potentially negative consequences for small and independent pharmacies, which are less likely to serve as contract pharmacy sites, yet have been shown to serve more rural patients and patients with barriers in accessing care.