On Jan. 8, 2020, the Centers for Medicare and Medicaid Services (CMS) published an informational bulletin titled “Best Practices for Avoiding 340B Duplicate Discounts in Medicaid.”[1] The bulletin outlines seven regulatory strategies State Medicaid agencies may consider when developing policies for preventing the occurrence of duplicate discounts in Medicaid Fee-for-Services (FFS) and Medicaid Managed Care Organization (MCO) programs.  Despite CMS’s interest in the prevention of duplicate discounts, 340B Program stakeholders have taken issue with the bulletin as many of the best practices “undermine the very purpose of 340B and potentially damage safety-net hospitals’ ability to care for patients with low incomes.”[2]

As background, the 340B Drug Discount Program (340B Program) prohibits the occurrence of “duplicate discounts” that result when a drug manufacturer is required to pay a rebate to a State Medicaid agency and also offer a 340B discount to a 340B covered entity on the same drug claim.  In recent years, many State Medicaid agencies have attempted to address the occurrence of duplicate discounts through various means, including moving Medicaid pharmacy benefits entirely under the Medicaid FFS system, requiring the prospective use of claims modifiers, and utilizing unique bank identification numbers (BINs) and processor control numbers (PCNs).  However, State Medicaid agencies have generally struggled to balance policies for the prevention of duplicate discounts with the need to maintain patient access to health care and preserve safety-net providers’ ability to provide care. 

Specifically, the informational bulletin recommends State Medicaid agencies consider the following when developing policies for the prevention of duplicate discounts:

1. Referring to the 340B Program Medicaid Exclusion File (MEF) to organize Medicaid Drug Rebate Program (MDRP) submissions to drug manufacturers;
2. Executing written tripartite agreements between the State Medicaid agency, a covered entity, and its contract pharmacy to govern retrospective identification of 340B claims;
3. Using the Medicaid State Plan Amendment (SPA) process to limit the ability of 340B covered entities and contract pharmacies to use 340B purchased drugs for treating Medicaid beneficiaries;
4. Requiring the use of 340B claims identifiers and submission clarification codes to prospectively identify 340B claims;
5. Implementing processes and procedures to exclude 340B claims submitted to Medicaid MCOs from the State Medicaid agency’s MDRP rebate requests;
6. Providing additional claim-level data to drug manufacturers to facilitate rebate claim identification; and
7. Requiring Medicaid MCOs to use specific BIN/PCN combinations unique to their Medicaid products to facilitate identification and removal of such claims from the State Medicaid agencies MDRP requests.
   
   

While the seven “best practices” may assist State Medicaid agencies in preventing the occurrence of duplicate discounts, implementation of one or all of the best practices could substantially harm covered entities’ and contract pharmacies’ ability to provide care, as well as detrimentally affect patient access to medication and care.  To this end, CMS expressly encourages State Medicaid agencies to work directly with covered entities and contract pharmacies in developing policies and procedures for preventing the occurrence of duplicate discounts in the 340B program.

Although the CMS informational bulletin has no legal effect on the 340B program or State Medicaid programs, it is important to note many State Medicaid agencies will likely evaluate whether to adopt one or several of the best practices identified in the bulletin.  If you or your organization may be impacted by any of the best practices identified in the informational bulletin or wish to discuss strategies for working with State Medicaid agencies, please contact a Dinsmore attorney.