Survey Looks at How State Medicaid Programs Handle 340B

About two-thirds of states prohibit 340B contract pharmacies, according to a new survey.

State Medicaid programs across the country have taken different approaches to navigating the oftentimes complex and confusing 340B Drug Pricing Program, according to a Manatt, Phelps & Phillips, LLP survey released Tuesday morning.

The report sought to analyze the interplay between Medicaid rebates and the 340B program, as drugs cannot be subject to discounts under both programs. Similarly, 340B drugs cannot be prescribed to Medicaid beneficiaries unless the state can identify the drugs and exclude them from Medicaid rebate requests.

One of the most notable data points were the dispensing fees associated with 340B drugs, which ranged from $2.32 to $21.28.

Additionally, nearly two-thirds of states prohibit 340B contract pharmacies, with some requiring claims-level identifies while others require contract pharmacies to prescription drugs under a different national provider identifier. The survey cited the submission of drug claims by contract pharmacies rather than hospitals.

The survey's findings are relevant for chief financial officers (CFO) because failure to adequately exclude 340B drugs from Medicaid rebate requests can lead to repayment obligations for the hospital, according to Helen Pfister, partner with Manatt Health.

She told HealthLeaders that the goal of the report was to bring clarity to the controversy around the 340B program and assist stakeholders on how the program interacts with Medicaid.

"This survey should be of interest to hospital CFOs who are focused on that issue because it specifies which methods are used in each of the 50 states," Pfister said. "Also of interest from a financial perspective is the wide variation in dispensing fees that state Medicaid programs pay for 340B drugs - and non-340B drugs, for that matter - as these fees may also have an impact on a hospital's bottom line."

Among the methods used by states to identify 340B drugs billed to Medicaid, 22 states rely on claims-level identifiers while 12 rely on the Medicaid Exclusion File under the Office of Pharmacy Affairs, though Pfister said the file is not entirely accurate.

There were also states that employed both methods, along with a state that prohibits all covered entities from using 340B drugs for beneficiaries and one state that permits its use for family planning clinics.

Pfister added that there were no geographic or political trends regarding how states approach the 340B program.

The 340B program has been around since 1992 but has received steady and sustained criticism in recent years that it is rife with abuse and lacking in effective oversight.

Over the past year or so, advocates for the 340B program have pushed back against proposed cuts from the Department of Health and Human Services.

The hospital outpatient prospective payment system (OPPS) proposal for fiscal 2020, first unveiled in July by the Center for Medicare & Medicaid Services, included a reduction to the federal reimbursement rate for hospitals that purchase prescription drugs under the 340B program at the average sales price minus 22.5%.

Several provider organizations took issue with the proposed cuts, which they say would negatively impact low-income patients and safety-net hospitals.

These proposed cuts were ultimately delayed as part of a larger budget deal to keep the federal government funded through mid-November.

In May, a federal judge ruled that the reduced reimbursement rate included in the OPPS proposal for fiscal year 2019 was unlawful and "in contravention of the Medicare Act's plain text."

Jack O'Brien is the Content Team Lead and Finance Editor at HealthLeaders, an HCPro brand.