April 30, 2014—Federal 340B contract pharmacy guidance “does not specify” whether covered entities are responsible for ensuring that states do not collect manufacturer rebates for 340B-purchased drugs reimbursed by Medicaid managed care organizations, the Department of Health and Human Services Office of Inspector General says in a letter to two 340B provider groups. [ms-protect-content id=”2799″]
Safety Net Hospitals for Pharmaceutical Access and the National Association of Community Health Centers had asked OIG to clarify the matter in a March 4 letter. They said language in OIG’s Feb. 5 report on 340B contract pharmacy arrangements was leading “policymakers, the public, and the media to erroneously conclude” that covered entities had such a duty with respect to Medicaid MCO-reimbursed drugs and that some were shirking their responsibility.
The report “does not acknowledge that current guidance on the issue of duplicate discounts pertains only to [FFS] Medicaid claims and that no federal guidance has been issued relating to 340B Medicaid MCO claims,” SNHPA and NACHC said in their letter. “By not acknowledging the lack of guidance, it appears that the OIG is interpreting current law and existing guidance as applying to Medicaid managed care. Further, by stating that covered entities are not preventing duplicate discounts in Medicaid managed care, the report implies that they have an obligation to do so. In fact, there is no such obligation.”
In its April 3 reply letter, OIG said its report “does not interpret law or guidance regarding legal obligations for preventing duplicate discounts for 340B-purchased drugs reimbursed by Medicaid managed care organizations.” Acknowledging the lack of specificity on this matter in current Health Resources and Services Administration guidance, it said the report “did not assess covered entities compliance on this issue.”
“The memorandum report presents only descriptive information reported by covered entities about how they operate their contract pharmacy arrangements under current guidance,” it said.
Covered entities have always been obligated to make sure that rebates are not paid on 340B-purchased drugs reimbursed by FFS Medicaid. To prevent duplicate discounts, entities must decide upon enrolling in 340B whether they will use 340B drugs for Medicaid FFS beneficiaries (“carve in”) or not (“carve out”). HRSA keeps a Medicaid Exclusion File listing the entities that have decided to carve Medicaid in, and states are directed to use the file to determine which 340B claims to exclude from their Medicaid FFS rebate requests.
The Affordable Care Act required states for the first time to collect rebates on drugs dispensed to Medicaid MCO beneficiaries. The ACA, however, also specifically excluded drugs subject to 340B discounts from this new rebate requirement. In an attachment to their letter to OIG, SNHPA and NACHC noted that, before health care reform, covered entities did not have to worry about preventing duplicate discounts on 340B MCO drugs. “By explicitly exempting 340B drugs from the expansion of the Medicaid rebate program to MCO drugs, Congress intended to preserve the status quo for covered entities,” the groups said.[/ms-protect-content]