8, 2020, the Centers for Medicare & Medicaid Services (CMS) issued an Informational Bulletin (Bulletin) outlining CMS’s view of
current “best practices” by states to avoid 340B duplicate discounts. The
Bulletin proposes some options that have been lauded by 340B advocates, while
other options have raised concerns.
the best practices cited by CMS are likely to elicit strong support within the
340B provider community.
- An option where states require that
managed care organizations (MCOs) and prescription benefit managers (PBMs) use
unique BIN/PCN combinations on plan identification cards to identify Medicaid
patients. Many Medicaid managed care
plans and their PBMs use the same BINs and PCNs for their Medicaid and
commercial lines of business. This means that, if covered entities use
any of these identifiers to exclude Medicaid claims from their 340B programs
(i.e., if they decide to carve out rather than carve in), they will end up
excluding non-Medicaid claims and depriving themselves of 340B revenue to which
they are entitled. This problem is avoided if the Medicaid plans have
unique BIN/PCN combinations.
- A confirmation that states should
only use the Medicaid Exclusion Files (MEF) to exclude 340B fee-for-service
(FFS) claims and that the MEF does not apply to claims submitted by covered
entities to MCOs. By making this confirmation,
CMS is affirming longstanding HRSA policy. Notwithstanding, several
states, including Nevada, Pennsylvania, and Washington, are relying on the MEF
to exclude 340B MCO claims from rebate invoicing. Such reliance
interferes with a covered entity’s ability to carve in MCO claims and carve out
FFS, or vice versa, and effectively forces covered entities to carve out MCO
drugs in the contract pharmacy arena. It has also been associated with
over-inclusion or under-inclusion of 340B claims in state rebate data.
This best practice should help discourage states from continuing to rely on the
MEF for MCO claims.
- An option where states provide
claims level and drug rebate data to manufacturers directly or through use of
an independent third-party data company. The
use of independent third parties to address the duplicate discount prohibition
opens significant opportunities to solve the MCO duplicate discount problem in
the private sector. For example, an independent contractor could form a
clearinghouse by collecting rebate data from states, on the one hand, and 340B
claims data from covered entities and contract pharmacies, on the other, and then
excluding the latter from the former to protect against duplicate
discounts. Similar to Oregon’s approach to avoiding duplicate discounts,
this option would permit covered entities to bypass Medicaid MCOs and provide
340B MCO claims data directly to a state contractor.
practices identified by CMS already have a history of being strongly opposed by
covered entities. Their inclusion in the Bulletin will likely intensify
- An option where states use their
state plan amendments (SPAs) to prohibit covered entities and/or contract
pharmacies in the state from using 340B purchased drugs for some or all of the
state’s Medicaid beneficiaries, commonly referred to as the “mandatory
carve-out” option. South Dakota and New
Hampshire have already adopted the mandatory carve-out option. 340B
advocates assert that this approach undermines the intent of the 340B program
by depriving covered entities of their federal right to participate in
340B. Delaware tried the same approach but, after successful advocacy by
covered entities at both the federal and state levels, Delaware agreed to
include in its SPA a carve-in option that is subject to both the covered
entity’s request and Delaware’s approval. A state’s right to collect
rebates on MCO drugs did not exist prior to enactment of the Affordable Care
Act in 2010. When Congress expanded the rebate program to include MCO
drugs, it explicitly limited that expansion to non-340B MCO drugs.
Covered entities argue that, by forcing covered entities to carve out Medicaid
MCO drugs from their 340B programs, states would be circumventing this
- An option where states require
covered entities and contract pharmacies to use claim modifiers – for example, “20” and “08” for retail claims and the “UD” modifier for
physician administered drugs – to identify 340B claims in real time.
Many 340B pharmacies, especially contract pharmacies, identify 340B claims
retrospectively, so this real-time standard is impossible to meet.
Covered entities have historically resisted this duplicate discount model
citing the significant administrative burden of re-adjudicating claims to flag
claims’ 340B status in real time.
options discussed in the Bulletin include: requiring a three-way agreement (covered
entity, contract pharmacy and state Medicaid agency) to prevent duplicate
discounts at contract pharmacies for Medicaid FFS claims; asking a covered
entity to confirm in writing that it is using 340B drugs for Medicaid patients;
and requiring MCOs to include claims identification provisions in their
provider agreements to avoid duplicate discounts.
will monitor how states, covered entities and other 340B stakeholders respond
to the Bulletin. It is unlikely that CMS would try to compel states to
implement any of the best practices described in the Bulletin because, as
sub-regulatory guidance, the Bulletin is unenforceable. States, on the
other hand, could seek to protect their use of a given best practice by
enacting legislation or engaging in rulemaking mandating that practice.