IQVIA white paper title page
IQVIA questions whether 340B claims identifiers can be used successfully to implement the Inflation Reduction Act's Medicare drug price negotiation and drug inflation rebate provisions.

Study Raises Questions About Using 340B Claim Modifiers to Implement Medicare Drug Price Negotiation and Inflation Rebate Provisions

New research by drug industry contractor IQVIA questions whether claims identifiers can be used successfully to exclude 340B-purchased drugs from new Medicare drug inflation rebates or to protect manufacturers from paying both a new negotiated Medicare price and a 340B price on the same drug.

“340B modifiers provide visibility to 340B transactions in some segments of payers, pharmacies, and products but not others,” IQVIA said in the Feb. 21 white paper. “Further thought needs to be given to determine the optimal methods for consistently identifying 340B drugs in order to support implementation of non-duplication and inflationary rebate provisions” of last year’s Inflation Reduction Act.

The IRA authorized Medicare to negotiate maximum fair prices with drug companies on small numbers of drugs that account for high percentages of total Medicare Part B and D spending. 340B covered entities will be able to buy drugs subject to negotiation at the maximum fair price or the 340B price, whichever is lower. The U.S. Centers for Medicare & Medicaid Services has not yet said how it proposes to implement this provision.

The IRA also will require manufacturers to pay Medicare rebates when prices of drugs covered by Parts B and D rise faster than the rate of inflation. The law excludes drugs for which the manufacturer paid a 340B discount from these inflation rebates.

CMS issued guidance in December requiring disproportionate share hospitals, rural referral centers, and non-rural sole community hospitals to use the National Council for Prescription Drug Programs “JG” modifier and all other entities to use the NCPDP “TB” modifier when submitting Part B claims for 340B-acquired drugs. It reiterated the requirement in a separate guidance document this month. CMS simultaneously this month issued related guidance seeking comments by March 11 on “the most reliable way to identify” 340B-purchased drugs dispensed to Part D beneficiaries so they can be excluded from new Part D inflation rebate invoices. The guidance describes pros and cons of requiring pharmacies either (a) to use the NCPDP “20” claims submission clarification code at time of adjudication or dispensing or (b) requiring pharmacies to submit an NCPDP “N1” claims transaction retrospectively to identify 340B-acquired drugs.

Several dozen state Medicaid agencies and some commercial payers require 340B entities to use these claims modifiers, IQVIA noted. However, it said, “their Achilles’ heel is the 340B status of the drug must be known at the point of sale to the patient in order to apply the modifier to the claim prior to adjudication. While this is possible for pharmacies that identify 340B transactions at the point of sale, which may occur in entity-owned pharmacies and often in those that use physical inventory, the drug’s 340B status is unknown for pharmacies using the 340B replenishment model and virtual inventory which is used by almost all contract pharmacies.”

IQVIA said it did the study to obtain insight into how 340B claims modifiers are used now and how they might be used to implement the IRA’s 340B-related provisions.

“This study examined 340B modifier usage data using a national sample of physician-administered and self-administered products, providers, pharmacies, and payers,” IQVIA said. “For Medicare Part B claims in 340B hospitals involving pass-through and separately payable drugs where reporting was mandatory, 60-89% of drug treatments used modifiers. But when reporting was optional, rates fell below 20%. For self-administered drugs across all payers, only 4% of branded, 340B-eligible pharmacy claims used a 340B modifier, rising to 50% for Medicaid claims at entity-owned pharmacies and falling to less than 1% at contract pharmacies. Also, 340B modifiers were sometimes used for products that were not 340B-eligible such as test strips, swabs, and vaccines.”

“Medicare Part D represents 40.1% of business for 340B-eligible, branded drugs while Medicare Part B is 36.3%, meaning that $34.0B to $37.5B of sales at wholesale acquisition cost (WAC) pricing may be at risk for IRA/340B duplicate discounts,” IQVIA said. “Further thought needs to be given to determine the optimal methods for consistently identifying 340B drugs in order to support implementation of non-duplication and inflationary rebate provisions of the IRA.”

IQVIA pointed out that the U.S. Health and Human Services Department Office of Inspector General earlier this month recommended that CMS should monitor non-hospital 340B covered entities’ use of modifiers to identify 340B-priced drugs in Part B claims, as these entities have not been required to use them  before.

“Monitoring of 340B modifiers needs to include Part D as well as Part B,” IQVIA said. It added:

  • “Thought should be given to how to make certain providers and pharmacies are clear about using 340B modifiers the right way. This should include addressing state laws which appear to be interfering with their use.”
  • “A system could be evaluated, possibly similar to the process used by 340B prescription discount cards, to support the identification of 340B drugs at the point of sale.”
  • “Additional 340B transparency measures” should be considered “include requiring the submission of claims data and the use of a clearinghouse.”
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