Why 340B Reform is Overdue: Q&A with Tyler Seville

In June of this year, Pharmaceutical Executive reported on Eli Lilly’s efforts to cut off 340B discounts to hospitals that the pharma company says have not submitted claims data. In response, the American Hospital Association (AHA) requested that the federal government take action.

At the time, this was the latest chapter in the ongoing effort to implement the 340B Drug Pricing Program, which has seen the AHA face off against the various pharma companies whose drugs were included in the government’s list of covered products back in October, 2025.

Pharmaceutical Executive recently spoke with Tyler Seville, associate director of market access policy strategy at ADVI, about the ongoing 340B issues. He primarily focused on a recent study from ADVI that looked into policy concerns and operational challenges. He also discussed how 340B appears to be interacting with other drug pricing programs, such as the Inflation Reduction Act (IRA).

Click here for the video version of this interview!

Pharmaceutical Executive: What is the current status of the 340B program?
Tyler Seville: At its core, the 340B program requires manufacturers already participating in Medicaid and Medicare Part B to provide additional outpatient drug discounts for certain covered entities — typically nonprofit or state-owned hospitals. Manufacturers are required to offer the 340B discounted price, and covered entities are able to acquire drugs at that price and then bill plans and payers at a much higher rate — whether the commercial rate or the Medicare rate. The delta between the discounted acquisition price and the reimbursement rate is what covered entities are able to keep.

The goal and intent of the program is to stretch resources. It was designed to support hospitals and covered entities in high-need areas — disproportionate share hospitals, children's hospitals, and federally qualified health centers. Unfortunately, the program has grown exponentially over the past decade and beyond. What was once a program generating less than $10 billion annually has now grown to over $100 billion, based on the latest data from HRSA. A program that was initially intended to be small and targeted — a way to cover the gaps that exist within Medicare and Medicaid — is now larger than Medicaid, larger than Medicare Part B, and on track to exceed Medicare itself within a few years.

Pharmaceutical Executive: What are the modern policy concerns stemming from 340B?
Tyler Seville: This was a well-intentioned policy. However, it has grown to the point where it has become a major financial liability for manufacturers — manufacturers who are trying to help patients but are navigating an increasingly complex web of overlapping discount obligations across Medicaid, Medicare, and 340B simultaneously.

It is now an open question whether patients are truly benefiting from the program the way they were intended to. What we continue to see is covered entities — major health systems and hospitals — taking 340B revenues and not reinvesting them in high-need areas or using them to improve access for underserved patients. Instead, those revenues are being used to expand facilities in wealthy suburban areas. That is the perverse incentive the program has created, and it is a significant departure from what the program was designed to do.

Pharmaceutical Executive: What is the impact of overlap between 340B and the IRA?
Tyler Seville: With the Inflation Reduction Act, there are two major policies that intersect with 340B.

The first is Medicare drug price negotiation. For certain drugs subject to a maximum fair price, manufacturers are required to offer the lower of either the 340B price or the maximum fair price. That obligation sits on top of the existing 340B discount — creating a compounding discount structure that manufacturers must navigate simultaneously.

The second area is inflationary rebates. Under the IRA, if a drug price increases faster than the rate of inflation, manufacturers are penalized with a rebate back to Medicare. The challenge is that 340B units are supposed to be excluded from that price calculation — but manufacturers don't have the data they need to make that exclusion accurately. Covered entities have the data: they know which drugs they purchased at the 340B price and who reimbursed them. Manufacturers don't. So you have a situation where manufacturers are trying to comply with federal law without access to the information that compliance requires. That is one of the core areas where the industry is pushing for reform.

Compounding this is an oversight problem. HRSA, the agency responsible for administering the 340B program, audits only a fraction of the covered entities participating in it — a finding our own research at ADVI has documented over the years. The federal government has watched this program grow to over $100 billion annually without building the oversight infrastructure to match that scale.

The data gap extends into Medicare as well. For Medicare Part B drugs, covered entities are required to include a claims modifier indicating that a drug was purchased at the 340B price. That same requirement does not exist for Part D drugs. Our research has found a meaningful lack of claims data with the modifier that would allow anyone — manufacturers, payers, or regulators — to determine which drugs were appropriately reimbursed under Medicare versus purchased at the 340B discount price. Without that data, meaningful oversight and accurate compliance are both extremely difficult.