When Safety-Net Programs Compete: Medicaid, 340B, And The Battle Over Drug Discounts

The Medicaid Drug Rebate Program and the 340B Drug Pricing Program are generally understood as separate efforts to promote drug affordability—one by directly subsidizing low-income patients through insurance coverage (Medicaid) and the other by indirectly subsidizing safety-net clinics and hospitals (340B). Yet they interact in ways that can unintentionally raise costs for Medicaid. This Policy Insight examines how this interaction occurs, introduces two policy strategies to mitigate the interaction, and summarizes the use of these strategies across states as of 2024. We conclude with recommendations for how policy makers can weigh the costs and benefits of states’ efforts to preserve Medicaid savings against lost revenue for 340B-participating organizations.