Oct. 17, 2019– A newly released survey on the interplay of the 340B drug discount program and Medicaid has raised questions about what federal and state rules are in place to prevent duplicate discounts. The bottom line is that several such rules already exist in all 50 states to prevent pharmaceutical manufacturers from paying both a 340B discount and a Medicaid rebate on the same drug.
The survey was released Oct. 15 by the professional services firm Manatt, Phelps & Phillips. In a press release, the firm stated that its report “summarizes laws, regulations and sub-regulatory guidance that govern how Medicaid programs in all 50 states reimburse for both 340B and non-340B drugs, and how Medicaid programs ensure that those drugs are not also subject to a Medicaid rebate.” The full report is available by purchase only and not been made accessible for public review.
This is a good time to review the ways in which federal and state agencies work with 340B covered entities to ensure that a manufacturer does not pay both a 340B discount and a Medicaid rebate on the same drug.
340B Requirements for FFS Medicaid Claims
The Health Resources & Services Administration (HRSA) requires 340B covered entities to use the agency’s Medicaid Exclusion File (MEF) to avoid duplicate discounts under fee-for-service (FFS). Under this system:
- The MEF identifies 340B providers that bill FFS Medicaid for 340B drugs so states can exclude those claims from rebate collection
- HRSA requires covered entities to ensure that their MEF information is accurate, including through its annual 340B recertification process
- Covered entities are prohibited from using contract pharmacies to dispense 340B drugs to Medicaid FFS beneficiaries unless the entity, pharmacy, and state have an arrangement in place to prevent duplicate discounts and HRSA is notified of the arrangement
- HRSA maintains a database of contract pharmacies that meet the state arrangement requirement
340B Requirements for MCO Medicaid Claims
For Medicaid managed care, the state, not the covered entity, is required under federal law to identify MCO claims for 340B drugs. Some states, such as Oregon, use models that are easier for hospitals to work with than others. Under this system:
- The Centers for Medicare & Medicaid Services (CMS) directs states to identify 340B MCO claims and exclude them from Medicaid rebates
- CMS does not require a set method of 340B claims identification but provides flexibility that allows states to use different approaches. This flexibility is vital because some states and providers do not have the resources to require 340B claims modifiers, and other states already have developed different types of claims identification methodologies.
- Some states, such as Oregon, require covered entities to submit a report to the state rebate contractor to retrospectively identify retail 340B drugs dispensed to MCO beneficiaries – a system that integrates well with 340B pharmacies’ virtual inventory systems
- Some states require hospitals to use a UD modifier to identify physician-administered Medicaid MCO 340B drugs, while other states require a numerical 340B identifier on hospital pharmacies’ retail claims