340B Covered Entity

Key facts

Eligibility defined in

Public Health Service Act Section 340B(a)(4)

Registered in

HRSA 340B OPAIS, during quarterly registration periods

Recertification

Annual

Two broad groups

Federal grantees and eligible hospitals

What is a 340B covered entity?

Covered entities are the only providers allowed to purchase drugs under the 340B Drug Pricing Program. Each must register with the Health Resources and Services Administration (HRSA), keep its record current in the 340B Office of Pharmacy Affairs Information System (OPAIS) and recertify every year.

Eligibility comes from the statute, not from a provider's size or payer mix alone. Clinics usually qualify by receiving a specific federal grant or designation, while hospitals qualify through ownership status and measures from their Medicare cost report.

Who qualifies for 340B

Hospitals must be publicly owned or operated, be private nonprofits with a state or local government contract to care for low-income patients, or have been formally granted governmental powers. Eligible entity types include:

• Federally qualified health centers and FQHC look-alikes.
• Ryan White HIV/AIDS Program grantees, hemophilia treatment centers, and certain Title X family planning, sexually transmitted disease and tuberculosis clinics.
• Tribal and urban Indian health organizations and Native Hawaiian health centers.
• Disproportionate share hospitals, children's hospitals and freestanding cancer hospitals with a disproportionate share adjustment percentage above 11.75 percent.
• Sole community hospitals and rural referral centers with a disproportionate share adjustment percentage of at least 8 percent, and critical access hospitals.

Why covered entity status matters

Covered entity status changes a provider's drug economics. A 340B hospital or clinic can buy outpatient drugs far below list price, and the margin between that price and payer reimbursement can support uncompensated care and other services.

Status also brings constraints. Disproportionate share hospitals, children's hospitals and freestanding cancer hospitals are generally barred from buying covered outpatient drugs through a group purchasing organization. Rural referral centers, sole community hospitals, critical access hospitals and freestanding cancer hospitals are subject to an orphan drug exclusion added by the Affordable Care Act. Off-site hospital clinics can use 340B drugs only when registered as child sites.

For account targeting and site-of-care analysis, OPAIS is the authoritative list of covered entities, child sites and contract pharmacies. HRSA's patient definition, which dates to 1996 guidance, determines which prescriptions qualify and has been the subject of litigation.