Private Equity and Corporate Investment Activity in 340B

Issue Brief

As the 340B Drug Pricing Program (“340B program”) has expanded in size and complexity, covered entities have looked externally for assistance in managing and growing their use of the program. This has created the opportunity for vendor firms to enter the 340B space. The products and services offered by these firms range in nature but generally have the goal of increasing covered entities’ total 340B drug margin (the difference between reimbursement and the discounted 340B price). As an example, third-party administrators (TPAs) use data from covered entities and pharmacies to identify prescriptions they believe likely qualify for 340B eligibility (based on the covered entity’s interpretation of the definition of a “patient”), place 340B replenishment orders as part of the retrospective system used to access the 340B price, and adjudicate payments. Through a TPA, covered entities can likely capture more 340B prescriptions than they otherwise would.

The compensation earned by 340B vendors has made them a target for investors, including corporations, private equity firms, and venture capitalists. Since 2002, according to review of public data sets and company disclosures, more than sixty significant transactions have involved private, for-profit companies active in the 340B space. The last three years alone have seen at least thirteen transactions, including two investments of more than $1 billion.

This brief was funded by the Pharmaceutical Research and Manufacturers of America (PhRMA Org | PhRMA).