At its core, 340B changes financial incentives for hospitals and drug manufacturers. Hospitals can purchase many medicines at steep discounts, often between 15% and 50%, while being reimbursed at the same rates as hospitals outside the program. That difference can create margins on certain drugs, particularly high-cost infused or injected treatments. Those margins are not uniform across products, creating uneven incentives throughout the system.

What is often overlooked in these discussions is that not every participant in the pharmaceutical supply chain plays a role in shaping the performance of the 340B program.

Healthcare distributors, for example, do not set 340B prices, determine eligibility, or decide how savings are used. Instead, they function as middlemen between manufacturers and providers, delivering products when they are lawfully available and authorized for distribution. The statutory discounts are manufacturer-funded, and participation and utilization decisions rest with covered entities. Distributors execute the program as written; they do not design or expand it.

As states consider new 340B legislation, some proposals include language prohibiting both manufacturers and wholesale distributors from “denying,” “restricting,” or “interfering” with access to 340B drugs. That framing merges distinct roles within the supply chain. 

Manufacturers control pricing decisions and contractual conditions. Covered entities determine participation and contract pharmacy arrangements. Distributors cannot compel a manufacturer to sell to a particular entity, nor can they override manufacturer-imposed conditions. They distribute products that are made available to them under existing contractual and legal frameworks.

This distinction becomes particularly important when controlled substances are involved. Treating fundamentally different actors as interchangeable risks imposes obligations on entities that lack the authority to fulfill them. This can create legal exposure, potential operational disruptions, and conflicts with federal compliance requirements without addressing the underlying policy issues. 

For example, federal law requires wholesale distributors to maintain systems to identify, investigate, and report suspicious orders that may indicate diversion. If an order triggers a red flag, distributors are legally required to delay shipment, report the order, or decline to ship the product. State laws that prohibit any “delay” or “restriction” could create tension with these federal obligations and, in some cases, with requirements under the national opioid settlement.

The broader issue is one of role clarity. The incentives embedded in 340B shape hospital and manufacturer behavior. Policy decisions about pricing, eligibility, transparency, and program oversight sit with lawmakers, regulators, manufacturers, and covered entities. Wholesale distributors operate downstream, focused on safe, secure, and compliant product delivery.

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As policymakers continue to evaluate the 340B program, it is essential to distinguish between entities that shape program terms and those that implement logistics. Clear lines of responsibility help preserve supply-chain integrity and avoid unintended legal conflicts, particularly in areas where federal diversion-control laws apply.

A productive policy discussion requires precision about who controls what within the 340B framework. Maintaining that clarity will help ensure that legislative efforts remain focused on program design and oversight — while allowing supply-chain intermediaries to continue performing their defined operational role.

Tomas J. Philipson is the Daniel Levin Professor of Public Policy Studies Emeritus at the University of Chicago Harris School of Public Policy.