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Setup guide

How does 340B contract pharmacy setup work with a TPA?

Short answer

A covered entity sets up a 340B contract pharmacy by signing a written agreement with the pharmacy, registering that pharmacy in HRSA's 340B OPAIS during a quarterly window (it can dispense 340B drugs from the first day of the next quarter), and setting up “ship to, bill to” purchasing so the wholesaler bills the covered entity but ships to the pharmacy. The TPA is the data layer in between: it receives the pharmacy's dispensing data, checks each prescription against the covered entity's patients, prescribers and locations, tracks eligible units, and triggers 340B replenishment orders. The covered entity stays responsible for compliance throughout.[1][2][3][4]

Talk to us about contract pharmacy Jump to the setup checklist
Who does what

Seven parties in a contract pharmacy arrangement

PartyRole in setup and day-to-day operation
Covered entitySigns the written contract, purchases and holds title to the 340B drugs, registers each pharmacy in OPAIS (Authorizing Official and Primary Contact), and remains responsible for preventing diversion and duplicate discounts.[1][3][4]
Contract pharmacyDispenses to the covered entity's patients, keeps a tracking system with the covered entity, provides reports and auditable records kept separately from its own operations, and checks shipments against orders.[3]
340B TPAA vendor the covered entity chooses to identify eligible claims, manage inventory and replenishment across contract pharmacies, and help submit claims data where manufacturers require it. It does not take on the covered entity's compliance responsibility.[4][5]
WholesalerBills the covered entity for 340B purchases and ships them to the contract pharmacy under the ship-to, bill-to arrangement.[3]
ManufacturerOffers drugs at or below the 340B ceiling price. Since 2020, many manufacturers have attached conditions to contract pharmacy shipments, such as claims data or limits on the number of pharmacies.[6][7][9]
HRSA / OPAISApproves contract pharmacy registrations and lists them as active in 340B OPAIS. A pharmacy can't dispense 340B drugs for the covered entity until it is listed as active.[1]
State Medicaid agencyMust be part of any arrangement to use 340B drugs for Medicaid prescriptions at a contract pharmacy (carve-in), so the same drug doesn't also get a Medicaid rebate.[1][3]
Setup checklist

Eight steps to a working contract pharmacy

  1. Step 1

    Decide what you need

    Decide whether you need contract pharmacy services and how drugs will move, then list every pharmacy location and every covered entity location that will use 340B drugs. HRSA expects all of them to be named in the written contract.[1]

  2. Step 2

    Sign a written contract that covers the essential elements

    HRSA's 2010 guidance lists what the agreement should address: the covered entity buys and keeps title to the drug; ship-to, bill-to purchasing; a tracking system to prevent diversion; a system to verify patient eligibility; no 340B drugs for Medicaid without a state arrangement; records available for independent audits and for HRSA and manufacturer audits; and a copy of the contract for HRSA on request.[3]

  3. Step 3

    Register the pharmacy in 340B OPAIS during an open window

    Registration is only open Oct 1–15, Jan 1–15, Apr 1–15 and Jul 1–15. The Primary Contact creates the registration and the Authorizing Official must authorize it within 15 calendar days, or it is cancelled. Have the pharmacy's DEA number ready, and make sure the name and address match the contract exactly.[1][2]

  4. Step 4

    Set up ship-to, bill-to purchasing

    Open 340B wholesaler accounts so the covered entity is billed and the pharmacy receives the shipment. An entity with more than one site can have each site billed individually or use a single billing address for all 340B purchases.[3]

  5. Step 5

    Connect the TPA

    Give the TPA what it needs to qualify prescriptions: the pharmacy's dispensing data feed, your eligible locations, your list of affiliated prescribers (HRSA's sample provisions have the covered entity give the pharmacy this list and keep it current), patient encounter data and the eligibility rules you've written down.[3][5]

  6. Step 6

    Settle Medicaid: carve-out or carve-in

    By default, contract pharmacies don't use 340B drugs for Medicaid prescriptions. Carving in requires an arrangement among the covered entity, the pharmacy and the state Medicaid agency, reported to HRSA. HRSA reviews carve-in requests, and an approved carve-in starts at the beginning of the next quarter.[1][3]

  7. Step 7

    Check manufacturer conditions and state law

    Review each manufacturer's contract pharmacy policy before go-live. Some require claims data or limit how many pharmacies they will ship to. State contract pharmacy laws may also apply where you operate. See the section below.[6][7][9]

  8. Step 8

    Go live, then oversee

    Once HRSA lists the pharmacy as active, dispensing can start on the first day of the next quarter. Ongoing, compare your prescribing records with the pharmacy's dispensing records. HRSA's sample tracking provisions describe quarterly sample comparisons and a six-month comparison of 340B purchasing and dispensing records, and HRSA expects independent audits.[1][3][4]

Data flow

What happens after a prescription is filled

The typical replenishment loop once the pharmacy is live.

  1. 01

    Prescription filled

    A patient fills a prescription at the contract pharmacy, which dispenses from its own stock and bills the payer as usual.

  2. 02

    Dispensing data to the TPA

    The pharmacy's claim and dispensing data flow to the covered entity's TPA.[5]

  3. 03

    Eligibility check

    The TPA checks each prescription against the covered entity's patients, prescribers, locations and Medicaid status. This is the tracking and patient-verification system the 2010 guidance calls for.[3]

  4. 04

    Accumulation

    Eligible units are tracked by drug and pharmacy until there is enough to replenish.[5]

  5. 05

    Replenishment

    A 340B order goes through the covered entity's account. The wholesaler bills the covered entity and ships to the pharmacy, and the pharmacy checks the shipment against the order.[3]

  6. 06

    Reporting and reconciliation

    The pharmacy provides billing statements, collection reports and receiving and dispensing records, and the covered entity reconciles them against its own records.[3][4]

Manufacturer conditions and the courts

The 340B statute doesn't mention contract pharmacies, and HRSA's policy on them has changed over time.[9] That's why the setup checklist includes a check of manufacturer conditions.

  • 2010

    HRSA guidance lets covered entities use more than one contract pharmacy.[3]

  • 2020

    Manufacturers start limiting contract pharmacy shipments. For example, Sanofi allowed one contract pharmacy for entities without an in-house pharmacy, or unlimited pharmacies if the entity provided claims data.[6]

  • Jan 30, 2023

    The Third Circuit (Sanofi v. HHS) holds that Section 340B does not require manufacturers to deliver to an unlimited number of contract pharmacies.[6]

  • Mar 12, 2024

    The Eighth Circuit (PhRMA v. McClain) upholds Arkansas's law barring manufacturers from restricting contract pharmacies. The Supreme Court declined review on Dec 9, 2024.[8][9]

  • May 21, 2024

    The D.C. Circuit (Novartis v. Johnson) holds that the statute does not categorically bar manufacturer conditions. It upholds a single-contract-pharmacy policy and a claims data requirement, and notes that more onerous conditions might still violate the statute.[7]

  • Sept 2025

    The Congressional Research Service counts challenges to at least twelve state contract pharmacy laws. Most courts so far have sided with the states, and a West Virginia court preliminarily blocked that state's law, which also bars manufacturers from requiring claims data.[9]

What this means for setup

  • Keep a current list of each manufacturer's contract pharmacy conditions, and check it before adding a pharmacy.
  • If a manufacturer requires claims data, make sure your TPA can submit it on schedule.[5][7]
  • Some manufacturers let entities without an in-house pharmacy designate a single contract pharmacy, so pick that pharmacy deliberately.[6][7]
  • Check whether your state has a contract pharmacy law, and track its litigation status.[8][9]
How Aventi helps

Contract pharmacy administration, set up with your team

Independent TPA

Aventi is an independent 340B TPA for contract pharmacy and split billing, trusted by 300 covered entities, 24 of them hospitals.

Built from your records

We start from your pharmacy agreements, OPAIS listings, locations and prescriber data, so eligibility rules match what's registered.

Contingency, no true-ups

Contract pharmacy and split billing services are priced on contingency, with no end-of-month true-ups. See how 340B TPA fees work.

Ready for 2027 rebates

The rebate module is Included for Aventi TPA clients. Read the 340B rebate model guide.

Talk to us about contract pharmacy
FAQ

340B contract pharmacy setup: common questions

It depends on the registration calendar. You need a signed written contract first, then you register the pharmacy in 340B OPAIS during an open window (Oct 1–15, Jan 1–15, Apr 1–15 or Jul 1–15). If HRSA approves, the pharmacy can begin dispensing 340B drugs on the first day of the next quarter.[1][2]

No. Only the covered entity's Authorizing Official and Primary Contact can register contract pharmacies in 340B OPAIS, and the Authorizing Official must authorize the request within 15 calendar days. A TPA can help you prepare, but the registration is yours.[1]

The covered entity. Under HRSA's 2010 guidance, the covered entity buys the drug and keeps title to it, and the wholesaler bills the covered entity while shipping to the pharmacy (ship-to, bill-to).[3]

Only if the covered entity, the contract pharmacy and the state Medicaid agency have an arrangement to prevent duplicate discounts, reported to HRSA. Without one, Medicaid prescriptions are carved out.[1][3]

HRSA's guidance puts the requirements on the covered entity and the pharmacy. It doesn't require a TPA. In practice, TPAs are vendors covered entities hire to identify eligible claims, manage replenishment across pharmacies and submit claims data.[3][5]

Federal appeals courts have said Section 340B does not bar manufacturers from setting some conditions. The Third Circuit (2023) and D.C. Circuit (2024) ruled against HHS's enforcement, and the D.C. Circuit upheld a single-pharmacy policy and a claims data requirement while noting that more onerous conditions might still be unlawful. Check each manufacturer's current policy.[6][7][9]

Several states have passed laws that bar manufacturers from restricting contract pharmacies. The Eighth Circuit upheld Arkansas's law in 2024, and CRS reported challenges to at least twelve state laws as of September 2025, with mixed results such as West Virginia's preliminary injunction.[8][9]

The covered entity stays responsible for its contract pharmacy arrangements. HRSA's sample contract language has the pharmacy pay the covered entity the discount amount so the covered entity can repay the manufacturer, and HRSA expects covered entities to self-disclose violations.[1][3][4]

Your contract pharmacy network and the claims data your TPA already collects are the starting point for rebate claim submission. Aventi's rebate module is Included for Aventi TPA clients.340B rebate model · 340B contract pharmacy after the rebate pilot

Related pages

Sources

  1. HRSA, Contract Pharmacy Services — https://www.hrsa.gov/opa/implementation-contract
  2. HRSA, Registration — https://www.hrsa.gov/opa/registration
  3. Federal Register, Notice Regarding 340B Drug Pricing Program—Contract Pharmacy Services (75 FR 10272, March 5, 2010) — https://www.federalregister.gov/documents/2010/03/05/2010-4755/notice-regarding-340b-drug-pricing-program-contract-pharmacy-services
  4. HRSA FAQ, What are the audit and compliance parameters under the contract pharmacy guidelines? — https://www.hrsa.gov/about/faqs/what-are-audit-compliance-parameters-under-contract-pharmacy-guidelines
  5. Health Affairs Scholar / PMC, Growing administrative complexity in the 340B program and the rise of third-party administrators (PMC10986201) — https://pmc.ncbi.nlm.nih.gov/articles/PMC10986201/
  6. U.S. Court of Appeals for the Third Circuit, Sanofi Aventis U.S. LLC v. HHS, No. 21-3167 (Jan. 30, 2023) — https://www2.ca3.uscourts.gov/opinarch/213167p.pdf
  7. U.S. Court of Appeals for the D.C. Circuit, Novartis Pharmaceuticals Corp. v. Johnson, No. 21-5299 (May 21, 2024) — https://media.cadc.uscourts.gov/opinions/docs/2024/05/21-5299-2055423.pdf
  8. U.S. Court of Appeals for the Eighth Circuit, PhRMA v. McClain, No. 22-3675 (Mar. 12, 2024) — https://ecf.ca8.uscourts.gov/opndir/24/03/223675P.pdf
  9. Congressional Research Service, The 340B Drug Discount Program: Litigation Topics and Trends (R48696, Sept. 10, 2025) — https://www.congress.gov/crs-product/R48696

Last updated November 10, 2026. This page is general information, not legal advice. Confirm your registrations and arrangements with HRSA.