CMS proposes adding information to Medicaid managed care beneficiaries' insurance cards to facilitate 340B duplicate discount prevention.

CMS Proposes Rules That Addresses 340B Duplicate Discounts in Medicaid Managed Care

The U.S. Centers for Medicare & Medicaid Services wants to make Medicaid managed care organizations use Medicaid-specific codes and group numbers on beneficiary insurance cards to help states, MCOs, and 340B covered entities avoid invoicing manufacturers for prohibited duplicate 340B discounts and Medicaid rebates on the same drugs.

CMS included the requirement in a comprehensive Medicaid Drug Rebate Program proposed rule published May 26. Comments are due by July 25.

The proposed rule also seeks new requirements to prevent drug makers from misclassifying drugs under MDRP to pay “different rebates to states than those supported by statute and regulation.” It would give the Secretary of Health and Human Services “additional compliance, oversight and enforcement” power to help ensure that drug makers are classifying their products correctly.

In 2017, drug manufacturer Mylan reached a $465 million settlement with the federal government to resolve claims it knowingly misclassified EpiPen as a generic drug to avoid paying Medicaid drug rebates. 340B providers got $19.3 million plus interest to settle claims that Mylan’s misclassification caused them to pay more that they should have for EpiPen under 340B.

340B Duplicate Discounts and Medicaid

The 340B statute is clear that, in Medicaid fee for service, covered entities are the ones that must ensure that manufacturers are not subjected to paying duplicate 340B discounts and Medicaid rebates on the same drugs. When they enroll in 340B, entities must tell the federal government if they will use 340B purchased drugs for Medicaid FFS beneficiaries (also known as carving-in Medicaid). Those that say they will carve-in Medicaid are listed in a federal database called the Medicaid Exclusion File. State Medicaid agencies are supposed to use it make sure they do not send rebate invoices to drug makers for drugs dispensed by those 340B entities.

Who’s ultimately responsible for preventing duplicate discounts in Medicaid managed care is murky.

The Affordable Care Act of 2010 required states for the first time to collect rebates for drugs paid through Medicaid MCOs. It said drugs covered by a Medicaid MCO are not subject to a rebate if also subject to a 340B discount. It’s widely (but not universally) accepted that this means states, not entities, are on the hook if a manufacturer is made to pay a duplicate 340B discount and Medicaid managed care rebate on the same drug.

It’s been 13 years since the ACA became law and states, drug makers, pharmacy benefit managers, and 340B entities still disagree about who is responsible for preventing 340B duplicate discounts in the Medicaid managed care realm.

The Health Resources and Services Administration issued guidance in 2014 encouraging “340B covered entities to work with their state to develop strategies to prevent duplicate discounts on drugs reimbursed through MCOs.” The guidance noted that “states may place certain requirements on covered entities regarding the prevention of duplicate discounts,” and that some entities “report using a variety of methods including, but not limited to, Bank Identification Numbers and/or Processor Control Numbers to identify patients of MCOs.”

CMS issued guidance in 2020 outlining “best practices that states are encouraged to consider” for avoiding 340B duplicate discounts in Medicaid. On Medicaid managed care, CMS said one solution is for each Medicaid MCO and its pharmacy benefit manager “to use a BIN/PCN combination that is unique to its Medicaid business … to readily identify a Medicaid beneficiary. This provides an additional tool in the prevention of duplicate discounts. Specifically, covered entities that have opted to ‘carve-out’ will know at the point of service whether to provide beneficiaries with medications purchased through the 340B program.”

CMS Proposed Rule

The MDRP proposed rule published last week echoed what HRSA said in 2014 and CMS said in 2020 about using unique BIN/PCN codes on Medicaid MCO beneficiaries insurance cards.

“It is often difficult to determine from a Medicaid managed care beneficiary’s health insurance card if he or she is covered under a Medicaid managed care plan or under non-Medicaid coverage, such as an employer-sponsored group health plan or individual market insurance, offered by the same organization or entity that offers the Medicaid managed care plan,” CMS said in the proposed rule. “This is due to the fact that Medicaid-specific BIN, PCN, and group numbers are not always placed on Medicaid managed care plan identification cards. However, if Medicaid-specific BIN/PCN and group information were included on the card, the pharmacy could enter this information into its claims processing system which would identify that the beneficiary is enrolled in a Medicaid managed care plan. We believe it is important that unique BIN/PCN/group numbers are established for Medicaid managed care plans.”

“Use of Medicaid-specific BIN/PCN/group numbers can help states and their managed care plans identify claims for drugs paid for under [340B] and avoid invoicing for rebates on 340B drugs,” CMS continued. “If the identification card included a unique Medicaid BIN/PCN/group number, and the state permits the use of 340B drugs at contract pharmacies for individuals enrolled in Medicaid managed care, then it would allow for the inclusion of a modifier at the point of dispensing that would identify the claim as ineligible for a Medicaid rebate. This would assist states with identifying 340B drug claims that should not be invoiced for Medicaid drug rebates.”

Covered entities have criticized duplicate discount solutions like the one CMS is proposing now. These methods wrongly assume, the entities say, that it is possible to know at point of sale if a prescription is being filled with a 340B purchased drug. In the inventory replenishment model prevalent in 340B operations, such determinations customarily are made long after the dispensing date.

Many entities’ preferred solution is for the government to create an independent third-party 340B claims processing contractor. It would retrospectively check claims level data from entities showing 340B drugs dispensed to Medicaid beneficiaries against claims level rebate data from states and their managed care contractors.

The PROTECT 340B Act, H.R. 2534, would create such a body to prevent 340B duplicate discounts. It says specifically that entities would be able to submit data “on a retrospective basis through a data file or another method that does not exclusively require point-of-sale identification.”

A growing number of drug manufacturers, meanwhile, have decided to try to solve their 340B and commercial duplicate discount problems by not offering 340B pricing when entities use more than one contract pharmacy or by requiring them to provide drug claims data for contract pharmacy purchases in order to use more than one contract pharmacy. HRSA has told manufacturers such policies are illegal. A federal appeals court ruled in January in favor of three manufacturers with such policies. Two other appeals courts are expected to rule in related cases at any time.