Managing Contract Pharmacies in the ESP System: Challenges, Compliance, and the Future of 340B

For hospitals and covered entities participating in the 340B program, managing contract pharmacies within the ESP system has become increasingly complex. With manufacturers tightening restrictions and requiring extensive data submission, hospitals must navigate compliance risks, optimize their pharmacy networks, and anticipate future changes in 340B administration. This article provides an analytical look at the evolving role of ESP, the pain points hospitals face, and what the future may hold.

The Evolving Role of ESP in 340B Management

The 340B ESP™ platform was introduced as a manufacturer-led initiative to combat duplicate discounts, but it has become a major operational burden for covered entities. While initially voluntary, many pharmaceutical companies now require hospitals to submit claims data through ESP to maintain 340B pricing at contract pharmacies.

In the past, covered entities had more flexibility in structuring their pharmacy networks, but with ESP, hospitals must:

• Prove 340B eligibility for each prescription with detailed data.
• Ensure compliance with manufacturer policies, which differ widely.
• Regularly upload claims to retain contract pharmacy discounts.

This shift has significantly impacted hospitals’ ability to manage contract pharmacy relationships efficiently.

Key Pain Points in Managing Contract Pharmacies in the ESP System

1. Data Submission Challenges: Complexity and Time Burden

One of the most significant pain points for covered entities is the data reporting requirements imposed by ESP. Many manufacturers now require biweekly or monthly submissions of pharmacy claims, and any delay or inaccuracy can result in denied discounts.

• Labor-Intensive Process: Hospitals must compile, clean, and submit large volumes of data, often manually.
• Privacy Concerns: Hospitals must de-identify patient data to remain HIPAA-compliant, which adds complexity.
• Frequent Policy Changes: Each manufacturer has different submission requirements, forcing hospitals to constantly adjust their processes.

2. Compliance Risks: Increasing Scrutiny and Legal Uncertainty

HRSA audits of 340B programs have intensified, and ESP participation does not guarantee compliance protection. Common compliance risks include:

• Incorrectly mapped contract pharmacies that do not meet manufacturer criteria.
• Data discrepancies between ESP submissions and HRSA audits, leading to financial penalties.
• Missed submission deadlines, resulting in lost eligibility for contract pharmacy pricing.

Hospitals must develop robust internal compliance checks to align ESP data with HRSA requirements and manufacturer policies.

3. Pharmacy Network Optimization: Adapting to Manufacturer Restrictions

Previously, hospitals could structure their contract pharmacy networks to maximize 340B savings. However, ESP-driven policies have led to:

• Limits on the number of contract pharmacies hospitals can use.
• Restrictions on specialty drugs, with some manufacturers removing high-cost medications from 340B pricing.
• Geographic limitations, preventing hospitals from partnering with distant pharmacies.

Many hospitals are re-evaluating their networks, investing in in-house outpatient pharmacies, and prioritizing direct dispensing strategies to retain access to 340B pricing.

4. Manufacturer Restrictions: The Growing Challenge

As of 2025, nearly 40 drug manufacturers have implemented some form of ESP-driven restriction on contract pharmacy discounts. These include:

• Rebate Models: Some manufacturers require hospitals to pay full price upfront and then submit for a 340B rebate.
• ‘Ship-to, Bill-to’ Requirements: Certain manufacturers mandate that drugs be shipped directly to a contract pharmacy instead of hospital wholesalers.
• Patient Definition Changes: Some manufacturers impose stricter rules on which prescriptions qualify.

Hospitals are facing financial losses as access to 340B pricing diminishes, forcing them to rethink their strategies for maintaining cost savings.

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The Future of ESP and 340B: What Hospitals Should Expect

Looking ahead, hospitals should prepare for continued restrictions, increasing oversight, and potential regulatory changes.

1. Expansion of ESP Data Requirements

It is likely that more manufacturers will adopt ESP mandates, increasing the data burden for hospitals. Future trends may include:

• Automated claim-matching requirements, reducing flexibility in reporting.
• More frequent audits from manufacturers, not just HRSA.
• Increased penalties for missing data deadlines, further impacting contract pharmacy revenue.

2. Federal & State Legislative Actions

While Congress has debated 340B reform, no sweeping legislation has passed yet. However:

• State laws protecting contract pharmacy arrangements may increase.
• Federal regulations could clarify contract pharmacy rights or set limits on manufacturer restrictions.

Hospitals should stay engaged with advocacy efforts to push for regulatory protections.

3. Shift Toward In-House Pharmacies & Direct Dispensing

With contract pharmacy restrictions tightening, more hospitals are considering:

• Investing in outpatient pharmacies to maintain 340B savings.
• Expanding specialty pharmacy services, especially for high-cost medications.
• Partnering with community-based pharmacies that remain eligible under ESP.

4. Consulting & Technology Solutions Will Become More Essential

Given the increasing complexity of ESP compliance, consulting firms specializing in 340B optimization will play a larger role in helping hospitals:

• Automate data submissions and ensure compliance.
• Analyze financial risks & optimize pharmacy networks.
• Develop strategies to maximize 340B savings despite restrictions.

How Hospitals Can Stay Ahead

Managing contract pharmacies within the ESP system is a growing challenge, but hospitals that proactively streamline data reporting, reinforce compliance, and optimize their pharmacy networks will be best positioned for the future. As manufacturer restrictions continue to evolve, hospitals must take a strategic, long-term approach to protecting 340B savings.

To remain competitive and compliant, covered entities should: ✔ Strengthen internal compliance processes to ensure ESP data matches HRSA standards.
✔ Evaluate contract pharmacy networks and explore in-house dispensing where possible.
✔ Leverage technology & consulting expertise to minimize administrative burdens.
✔ Engage in advocacy efforts to protect hospital rights within the 340B program.

The next few years will be crucial in defining the future of ESP and 340B, and hospitals that stay ahead of these trends will be better prepared to navigate restrictions while maintaining financial stability.

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