The federal 340B Drug Pricing Program is highly consequential for employers and plan sponsors, directly affecting rebate cash flows and net pharmacy spending. Managing 340B exposure through precise contract definitions, transparent data, and thoughtful network and formulary strategies can help preserve rebate integrity and reduce audit and clawback risk.

Purchases of outpatient drugs under the 340B program increased to roughly $81.4 billion in 2024, up from $6.6 billion in 2010, driven by an increase in the number of covered entities and the proliferation of contract pharmacies. The pharmacies partner with covered entities to dispense 340B drugs to eligible patients. For employers and plan sponsors, the scale is consequential: 340B claims are typically excluded from rebate guarantees and ineligible for rebate payments in pharmacy benefit manager (PBM) contracts. These claims are also associated with higher cost drug utilization, which could elevate net plan spend for 340B claims.

With the increase in covered entities and contract pharmacies, more claims have the potential to be ineligible for manufacturer rebates—a key issue for plans given that rebates average roughly 25% of gross pharmacy costs. Genentech recently commissioned Milliman to highlight the impact of the 340B program on employers and summarize actions self-funded employers may consider to manage pharmaceutical drug costs associated with 340B.

Key considerations for employers:

• PBM contract and reporting: Add a precise, narrow definition of 340B; request quarterly, claim-level reporting plus audit rights on 340B volumes; require clear, time-limited clawback protocols for 340B claims.
• Pharmacy network: Evaluate selective or exclusive specialty networks to limit which pharmacies are included.
• Benefit design: Evaluate low-net-cost formularies that emphasize lower wholesale acquisition cost options and generics; understand how 340B incentives may increase net costs directly and may drive utilization to higher-cost sites of care.

This report was commissioned by Genentech.