CMS Addresses Duplicate Discounts, State Medicaid Rebate Requests

CMS has issued guidance that will help states avoid pursuing a duplicate discount from manufacturers when submitting state Medicaid rebate requests.

“Manufacturers are not required to both provide a 340B price and pay the state a rebate under the Medicaid drug rebate program for the same drug,” the bulletin explains.

Nevertheless, this remains a problem. The process is complex and there are multiple ways that states incorrectly request rebates.

In 2017, Wisconsin poorly invoiced providers for three years when the state failed to submit National Drug Codes (NDCs) for single-source and top-20 multi-source drugs and utilization data.

In 2018, the White House tried to eliminate rebates altogether but reneged when it became clear that such a policy would raise Medicare premiums.

Due to the complexities of rebate requests, particularly in regard to excluding 340B drugs that are already covered for one reason or another, more than one OIG report has encouraged CMS to provide guidance on this subject.

The guidance includes seven strategies for avoiding duplicate discounts.

First, CMS recommends that states refer to the 340B Medicaid Exclusion File to organize information regarding which entities that are covered have billed 340B drugs. 

When states go to submit their Medicaid rebate requests to the drug manufacturers, they can look to the 340B Medicaid Exclusion File to know what entities they can leave out of their request.

This is not foolproof, CMS warns. Not all 340B covered entities are covered in the Medicaid Exclusion File.

“The use of the MEF should be limited to Medicaid FFS and associated compliance requirements,” the bulletin says.

Second, when working with a contract pharmacy as many states do, CMS recommends forming a three-way contract between state Medicaid agencies, the 340B covered entity, and the contract pharmacy. The covered entity must send the contract to the Health Resources and Services Administration’s (HRSA’s) Office of Pharmacy Affairs to be included in their reports.

Without a three-way contract, contract pharmacies can severely tangle the claims identification process. The result is an increased administrative burden and higher costs, due to the need for an outside contractor to trace and identify the claims.

Third, CMS cites examples of states using a state plan amendment (SPA) to tailor the process and rectify common situations that result in duplicate discounts. 

With an SPA, some states require covered entities and/or contracted pharmacies to report 340B drug distribution information. Other states use it to restrict what entities can distribute 340B drugs.

Fourth, CMS recommends using a 340B Claims Identifier. There are three types of identifiers that a state could use: a submission clarification code issued by the National Council for Prescription Drug Programs, the UD modifier or state-specific modifiers from the American National Standards Institute’s (ANSI) Accredited Standards Committee (ASC), or the physician administered drugs billing modifiers used for dual eligible beneficiaries.

The state then need only exclude claims with the appropriate identifications when submitting their Medicaid rebate requests to avoid duplicate discounts.

The process also gets complicated when Medicaid managed care organizations are responsible for covering a drug. Thus, fifth, CMS reminds states to exclude these 340B drugs covered by Medicaid managed care organizations from their Medicaid rebate request. 

“States must include the requirements from 42 CFR §438.3(s)(3) in their managed care plan contracts; that provision requires the managed care plan to exclude utilization data for covered outpatient drugs that are subject to discounts under the 340B drug pricing program from the reports that managed care plans submit to the state when states do not require submission of managed care drug claims data from 340B covered entities directly,” the bulletin says.

Sixth, states may allow manufacturers to validate the Medicaid drug rebate invoices by providing claims data to go with it. Some states do this by creating a secured web portal that houses the invoice data as well as claims data. This can reduce costs to the state by decreasing the likelihood of a manufacturer dispute and, if one does arise, decreasing the time spent looking for the appropriate claims information.

Finally, Medicaid managed care organizations and their pharmacy benefit managers can implement a code for its 340B covered business using a combination of an NCPDP Processing Bank Identification Number (BIN) and a Processor Control Number (PCN). When applied to Medicaid managed care plan identification cards, a managed care organization can quickly determine whether a 340B drug was dispensed to a Medicaid beneficiary at a covered entity.

“CMS understands that preventing billing for duplicate discounts in the 340B Program can present challenges to state Medicaid programs, but there are potential best practices that can be employed requiring commitment from all stakeholders involved,” the bulletin concludes. “In working to share and implement these best practices for avoiding duplicate discounts, CMS remains committed to providing access to all Medicaid beneficiaries and recognizes the important role that the 340B Program plays towards that goal.”