Pharm'Up 
In a recent interview with Pharmacy Times, Shawn Gremminger, the president and CEO of the National Alliance of Healthcare Purchaser Coalitions, shed light on a critical issue facing the pharmaceutical industry: how the 340B contract pharmacy model, originally designed to support independent pharmacies, is now creating a significant competitive disadvantage for them.
According to Gremminger, the program’s initial intent was for independent pharmacies, often located near covered entities (hospitals, health systems, etc.), to serve as contract pharmacies. In that era, each covered entity was limited to a single contract pharmacy. However, a major policy change over the last 5-10 years has eliminated this restriction, allowing for an unlimited number of contract pharmacies. This shift has fundamentally changed the landscape.
Today, covered entities find it far more convenient and profitable to partner with large pharmacy networks like CVS and Walgreens. This trend has largely excluded independent pharmacies from a lucrative part of the business, leaving them without access to the substantial profits that large chains are now enjoying. This disadvantage is further compounded by the fact that the 340B program has also expanded into mail-order services, a capability that most independent pharmacies cannot offer.
The core of the problem lies in the program’s “buy low, sell high” model. Covered entities purchase drugs at a steep discount from manufacturers and then sell them at a much higher commercial rate to patients, particularly those who are commercially insured. This “spread” generates significant revenue for the covered entity, which it then shares with its contract pharmacy. As a result, pharmacies that are part of the 340B network are thriving with strong margins, while those outside of it, especially independent pharmacies not affiliated with Pharmacy Benefit Managers (PBMs), are facing severe underpayment for their drugs.
This financial disparity creates a clear divide in the market: pharmacies participating in 340B are financially stable, while those who cannot access the program are struggling. Gremminger also highlighted the ethical challenges this model presents to pharmacists. He noted that pharmacists are often put in a difficult position, dispensing drugs that they know may be overpriced or less effective than other alternatives. While it’s unclear if prescribers at 340B-covered entities are consciously influenced by these incentives, the data clearly shows that patients at these facilities are more likely to be prescribed a higher volume of more expensive drugs that are marked up more than elsewhere.
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