United States: Mid-Year 340B Program Update

Since our last 340B Drug Pricing Program (340B Program) update, the U.S. Centers for Medicare & Medicaid Services (CMS) has issued two regulations, the final Medicaid managed care regulation and a proposed update to the Medicare outpatient prospective payment schedule to implement new site neutrality requirements, that impact the 340B Program. Providers participating in the 340B Program (covered entities), as well as their contract pharmacies and other stakeholders such as drug manufacturers, state Medicaid agencies, and Medicaid managed care plans, should be aware of the potential changes that may occur as these rules become effective. Additionally, the Health and Human Services Office of Inspector General (OIG) recently issued a report making recommendations related to the 340B Program that could also affect 340B Program policy. In addition, the Health Resources and Services Administration (HRSA) expects to publish significant new 340B Program regulations and guidance later this year.

Duplicate Discounts for Medicaid Managed Care Patients

Covered entities and other stakeholders involved in the 340B Program should be aware of evolving mechanisms for identifying claims submitted to Medicaid managed care plans (Medicaid plans) for outpatient drugs purchased through the 340B Program. In May 2016, the Centers for Medicare and Medicaid Services (CMS) published long-anticipated Medicaid managed care regulations (Final Rule) that require Medicaid plans that provide outpatient drug coverage to report drug utilization data to the state so that rebates may be claimed under the Medicaid Drug Rebate Program (MDRP). As part of this reporting, Medicaid plans are required to exclude utilization data for drugs that are subject to discounts under the 340B Program so that drug manufacturers will not subject to a "duplicate discount." State Medicaid agencies must implement these requirements beginning with contracts with Medicaid plans that begin on or after July 1, 2017. To implement this reporting, mechanisms (potentially including new means to identify which patients are part of a plan's Medicaid line of business) will need to be developed to allow covered entities, contract pharmacies, and Medicaid plans to identify which drug claims are filled with 340B drugs.

In the preamble to the Final Rule, CMS indicates that state contracts with Medicaid plans should include specific language addressing which tools the plans can use to exclude from utilization reports drugs purchased through the 340B Program. CMS notes that the states, managed care plans, covered entities, and pharmacies should work together to establish a standard process to identify 340B claims effectively. CMS identifies multiple options, including: (1) plans could include in their contracts with pharmacies a reference to billing instructions or processes that must be followed when identifying a 340B patient and dispensing a 340B drug to a Medicaid patient, or (2) states could require plans to require covered entities or their contract pharmacies to use specific identifiers on prescriptions so the plan recognizes that the claim should be billed as a 340B claim. States may also develop mechanisms where covered entities submit managed care claims data directly to the state, in which case Medicaid plans are not required to exclude 340B claims from their utilization reports. Covered entities and their contract pharmacies should be alert for potential guidance from either state Medicaid programs or individual Medicaid plans related to the identification and reporting of the use of 340B drugs billed to Medicaid plans. The Final Rule does not address reimbursement by Medicaid plans for drugs dispensed by covered entities or their contract pharmacies.

In June 2016, the OIG also addressed the issue of Medicaid managed care rebates and 340B drugs when it published a report entitled "State Efforts To Exclude 340B Drugs From Medicaid Managed Care Rebates." In the report, the OIG concludes that many states use methods that may be inaccurate to identify 340B drug claims when calculating manufacturer rebates for drugs paid through Medicaid plans. The OIG's report found that the majority of states that report having methods to identify claims for 340B drugs purchased for Medicaid plan patients use provider-level methods to identify such claims. The report concludes that these methods may not accurately identify 340B claims from a covered entity because they treat all drug claims from the covered entity the same way and do not allow covered entities to differentiate among its 340B claims and non-340B claims to Medicaid, therefore creating a risk of duplicate discounts or of foregone rebates. The OIG's report found that fewer states use claim-level methods to identify 340B claims and that these methods are more accurate because they permit covered entities to differentiate among specific claims. The report also found that many states reported using the HRSA Medicaid Exclusion File to identify 340B claims for Medicaid plan drugs even though HRSA has issued guidance providing that the Medicaid Exclusion File should only be used for fee-for-service drugs.

The OIG report recommends that CMS require states to use claim-level methods to identify 340B claims, while acknowledging that CMS could allow states flexibility in complying with this requirement. Consistent with its position in the Final Rule, CMS disagreed with the OIG's recommendation, stating that current law does not contemplate this requirement for states. The OIG also recommends that HRSA clarify its final 340B Program Omnibus Guidance to specify that for Medicaid plan drugs, covered entities must follow state instructions to facilitate claim-level identification of drug purchased through the 340B Program, which is not contemplated under the proposed guidance. HRSA agreed with the OIG's recommendation to clarify this issue in the final guidance, but said that it would consider OIG's recommendations in conjunction with the public comments it received on the proposed guidance.

CMS Proposed Rule on Payments for Off-Campus Hospital Outpatient Clinics

On July 6, 2016, CMS issued proposed regulations to implement Section 603 of the Bipartisan Budget Act of 2015. The proposed regulations would implement new "site neutrality" requirements that will change to the way certain off-campus hospital outpatient departments will be paid. The proposed regulations do not specifically discuss the eligibility of these off-campus hospital departments for the 340B Program. However, CMS specifically states that the off-campus outpatient departments would still be considered to be part of the hospital and that the hospital as a whole would continue to be required to meet all applicable conditions of regulations governing its provider-based status. Under current HRSA guidance, an off-campus location of a hospital is eligible to participate in the 340B Program if the hospital is a covered entity and the off-campus location is a reimbursable cost center on the hospital's Medicare cost report and is registered with HRSA as a "child site." In order to be a reimbursable cost center, Medicare's provider-based requirements must be met. In the proposed rule, CMS requests comments on issues including the hospital cost report and enrollment of these off-campus clinics. Hospitals that participate in the 340B Program and utilize off-campus locations affected by the proposed rule should analyze carefully the potential implications of the proposed regulations and the issues which CMS seeks comments on, and consider submitting comments to help ensure the preservation of 340B Program eligibility for the impacted off-campus locations. We note that HRSA also actively sought comments on issues related to demonstrating the eligibility of off-site outpatient facilities as part of its proposed omnibus guidance. It is likely that HRSA will consider CMS' final rule when issuing its final guidance.

Impending HRSA Rules and Guidance

This year was expected to be a critical year with respect to the issuance of HRSA guidance impacting 340B Program covered entities and drug manufacturers. While several key rules and guidance have been delayed, some or all of these are still expected later this year based on the agency's regulatory agenda. HRSA is scheduled to issue a proposed rule establishing a required and binding administrative dispute process for disputes between covered entities and drug manufacturers in September. A final rule imposing monetary sanctions on drug manufacturers who charge covered entities more than the applicable 340B Program price and setting forth the standards and methodology for the calculation of ceiling prices for the 340B Program is set to be published in November. Additionally, HRSA's long-awaited final omnibus guidance is now scheduled to be published in December, although it would not be surprising to see this guidance further delayed.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions