FQHCs depend on the 340B Drug Pricing Program to obtain outpatient medications at significantly reduced prices in order to serve more patients in need.

However, maintaining compliance with 340B’s complex rules has become a daunting challenge. Health center leaders face a “compliance cliff”. Any misstep or unresolved dispute could jeopardize 340B savings that fund critical services. The burden of tracking eligible patients, managing contract pharmacies, and keeping up with changing guidance leaves many FQHC teams feeling overwhelmed. The issue at hand is how to sustain the benefits of 340B for vulnerable communities while avoiding compliance pitfalls that could endanger those benefits.

Our goal is to equip FQHC leadership and compliance teams with clarity and confidence in navigating 340B requirements.

By breaking down the core compliance rules, recent regulatory changes, and potential risks, we aim to replace uncertainty with understanding. FQHCs often operate with limited resources, so the focus is on practical guidance – what steps ensure compliance, how to prepare for audits, and ways to adapt to external challenges (like drug manufacturer restrictions) without losing hope. Ultimately, the goal is to help FQHCs continue leveraging 340B savings for patient care safely and sustainably.

340B’s Importance

The 340B Program was created to help safety-net providers “stretch scarce federal resources as far as possible,” enabling FQHCs to reinvest drug savings into expanded services for uninsured and underinsured patients. Compliance is critical to preserve these benefits.

Core Compliance Requirements

FQHCs must ensure 340B drugs only go to eligible patients and sites, prevent Medicaid duplicate discounts, maintain auditable records of all 340B purchases/dispenses, and complete annual recertification with HRSA. Failing to meet any of these requirements can result in findings of diversion or other violations.

Compliance Challenges

Real-world challenges include correctly identifying eligible patient encounters across many clinics and managing arrangements with contract pharmacies. Many FQHCs use outside pharmacies to increase access, but oversight is essential. The FQHC remains liable if 340B drugs are dispensed in error. Keeping registration information up-to-date in HRSA’s database and training staff on evolving guidelines are ongoing burdens.

Recent Changes

New regulations and dispute resolution processes are emerging. For example, in 2024 HHS implemented a formal Administrative Dispute Resolution (ADR) process for 340B, giving FQHCs a path to claim relief if they are overcharged by drug manufacturers. Additionally, manufacturers imposing restrictions on 340B pricing at contract pharmacies have led to legal battles, creating uncertainty for health centers.

Consequences of Non-Compliance

Falling off the “340B compliance cliff” has serious repercussions. HRSA audits can require health centers to repay drug manufacturers for any discounted pricing they should not have received. In extreme cases, an FQHC can be removed from the 340B program, losing access to all 340B discounts. Such an event would be financially devastating. Often forcing service cutbacks that hurt patient care.

Compliance can feel overwhelming, but there is hope. FQHC leaders are not alone in this challenge.

Many have successfully navigated 340B by instituting strong internal controls and seeking guidance when needed. By recognizing common pitfalls and preparing for them, health centers can transform anxiety into action. Think of compliance efforts as safeguarding your mission: every policy check, audit, or staff training is protecting the discounts that enable your care for vulnerable patients. While the landscape (regulations, manufacturer behavior, etc.) may shift, a proactive and informed approach will keep your health center on solid ground, far from the cliff’s edge. In short, with empathy for the burden and encouragement that “it can be managed”, we conclude that diligent 340B compliance is achievable and ultimately rewarding. It secures the resources that help your community thrive.

The full research article (“Policy Brief: Confronting the 340B Compliance Cliff”) provides:

• Background and Program Overview: A recap of 340B’s purpose, eligibility criteria for FQHCs, and why the program’s savings are so critical for community health.
• Detailed Compliance Requirements: An outline of key rules (patient and site eligibility, duplicate discount prevention, record-keeping, recertification) and examples of how FQHCs can meet these requirements.
• Audit Findings and Pitfalls: Insights from HRSA audits on common compliance problems (e.g. diversion to ineligible patients, contract pharmacy oversights) and best practices (like regular self-audits and staff training) to address them.
• Emerging Challenges: An analysis of recent developments such as the new ADR process for disputes, ongoing contract pharmacy disputes with drug manufacturers, and how these external issues impact FQHCs’ 340B savings.
• Risk Management Strategies: Guidance on handling the “compliance cliff” – including preparation for HRSA audits, what to do if a violation is identified, and how to avoid worst-case scenarios like program termination. The brief emphasizes proactive measures and leadership’s role in fostering a compliance culture.

At Peregrine Health, we operate exclusively in the community health center space. Every challenge described in this piece, from contract pharmacy restrictions to compliance documentation, is something we’ve seen firsthand through our work with FQHCs.

We are also deeply invested in the long-term sustainability of programs like 340B, especially because we run and support Medication-Assisted Treatment (MAT) programs across the country. These services rely heavily on the stability and savings provided by 340B to ensure patients with substance use disorders can access timely, affordable care.

This issue isn’t abstract to us. It directly impacts the financial health of the organizations we work with, the services they can provide, and ultimately, the patients they serve. That’s why we stay current, ask the hard questions, and share our findings. We want our partners to feel seen, supported, and equipped to lead with clarity.