Eli Lilly is conducting government approved 340B provider audits that for the first time look for certain Medicaid health plan duplicate discounts.

Lilly Asks Covered Entity to Promptly Repay “Duplicate 340B/Medicaid Discounts”

Drug manufacturer Eli Lilly asked a 340B covered entity last week to promptly repay it for “duplicate 340B/Medicaid discounts” and evaluate all Lilly prescriptions that it or its contract pharmacies dispensed for the last three years.

Consultants and attorneys with expertise on 340B duplicate discounts said such a request would be unorthodox if the rebates involved Medicaid managed care. The Centers for Medicaid & Medicaid Services issued guidance in 2016 instructing states—not covered entities—to implement processes to ensure that states and their Medicaid managed care contractors prevent duplicate discounts. More than 70% of Medicaid beneficiaries nationally are enrolled in managed care plans. Covered entities however are responsible for preventing duplicate discounts in Medicaid fee for service.

“I believe Lilly is pushing the boundaries,” a consultant said.

Lilly sent the repayment request to the entity by email on April 11. 340B Report obtained a redacted copy. It does not identify the entity, its type, or its location.

Lilly did not say in the letter how it identified the alleged duplicate discounts. Lilly, however, lets entities dispense 340B-purchased drugs through an unlimited number of contract pharmacies if the entities agree to supply related drug claims data to industry contractor 340B ESP. 340B Report learned that the entity has been submitting claims data to Lilly via 340B ESP under Lilly’s policy. Lilly said in a Dec. 16, 2021, FAQ that it uses such data “to monitor for and avoid duplicate discounts and to ensure the eligibility of certain contract pharmacy replenishment orders.”

Lilly declined to answer if it discovered the duplicate discounts through the entity’s claims data submissions to 340B ESP, if the 340B discounts duplicated Medicaid fee for service or Medicaid managed care rebates, or what will happen if the entity declines Lilly’s refund request.

“Duplicate Medicaid discounts are prohibited by the 340B statute and all stakeholders should be working together to prevent and correct them,” the company said yesterday. “Lilly remains committed to working with stakeholders to bring transparency and accountability to the 340B program.”

If Lilly discovered the duplicate discounts through the entity’s claims submissions, it would be the first known instance of a drug company trying to recoup Medicaid-related duplicate discounts from a covered entity on the basis of claims data that 340B ESP collected on the company’s behalf.

340B ESP said this morning, “We are not in a position to comment on this.”

Drug companies have been letting entities continue to use multiple contract pharmacies in exchange for their relevant claims data since late 2020. Exactly what they have done with the data is not widely known.

In its letter last week seeking a refund from the covered entity, Lilly said, “The state where you operate requires manufacturers to seek recoupment from covered entities (CE) rather than the State Medicaid program.” Consultants and attorneys involved in 340B matters said they were unaware of any states that say explicitly that this is their policy. Some may have unofficial policies to this effect, they said. None said they knew of a list of any such states.

Lilly declined to identify which states these are. It did not answer whether is it requesting refunds for duplicate discounts from entities in such states only.

Lilly also said in its letter to the covered entity that it “recalculates the purchase price by converting from the original purchase price (i.e., the 340B ceiling price in effect at the time of purchase) to the wholesale acquisition cost (WAC) at the time of purchase.” The 340B program’s group purchasing prohibition applies only to disproportionate share hospitals, children’s hospitals, and free-standing cancer hospitals. Other covered entity types can buy drugs outside of 340B through a GPO or other buying arrangement. In general, pricing under a GPO and other negotiated pricing arrangements are higher than the 340B ceiling price but lower than WAC.

“Once we receive your confirmation, Lilly Accounts Receivable will issue an invoice and W-9 to your email address,” the letter said. “Also, as we have observed that this appears to be a significant and recurring problem, we respectfully request a description of your policy or process for avoiding duplicate discounts in the future and in settings outside of contract pharmacies and a description of the corrective action plan you intend to implement to avoid recurrence of duplicate discounts.”

Lilly is one of nine drug makers that let entities dispense 340B-purchased drugs through an unlimited number of contract pharmacies if the entities agree to supply related drug claims data to industry contractor 340B ESP.

The 340B statute says covered entities may not request 340B discounts on drugs subject to rebates under Medicaid fee for service. Federal rules and guidelines are clear that, with respect to Medicaid fee for service, entities are responsible for preventing 340B duplicate discounts, attorneys and consultants involved in 340B affairs say.

Debate Over Responsible Party

Responsibility for 340B duplicate discount prevention is murkier in Medicaid managed care. Federal law says drugs covered by Medicaid MCOs are not subject to a rebate if also subject to a 340B discount. Federal rules require states to have language in Medicaid managed care contracts requiring plans to have processes to prevent 340B duplicate discounts. Some experts say this means states, not entities, are on the hook for duplicate discounts in Medicaid managed care. But not all experts agree.

In general, contractors that help manufacturers get refunds for 340B duplicate discounts in the Medicaid managed care space have sought recoupment exclusively from states, attorneys and consultants involved in 340B affairs say.

Lilly’s April 11 letter to the covered entity seeking repayment for 340B duplicate discounts does not say how the manufacturer identified the duplication. Nor did it say if the duplicate rebates were in Medicaid fee for service, managed care, or both.

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