August 21, 2014—The Medicaid drug rebate program saved states and the federal government an average of $17.5 billion annually between 2011 and 2013, an amount that will grow as a result of changes made by the Affordable Care Act, the U.S. Health and Human Services Office of Inspector General says in a new report. [ms-protect-content id=”2799″]
Sometimes, however, states and drug manufacturers disagree on the amount of money that manufacturers owe in rebates, which can lead to lead to lost money for states and the federal government, OIG notes in the Aug. 20 study
According to the study, 29 of the 31 states that OIG requested data from said that only 6 percent or less of the Medicaid rebate money they invoiced drugmakers in calendar year 2012 was in dispute. In 24 of those states, only 2 percent or less was in dispute.
Some examples of causes of rebate disputes include unit-of-measure conversions, physician-administered drugs, terminated drugs, and 340B-purchased drugs, OIG said.
Drugs bought through 340B are not subject to Medicaid rebates. If providers opt to buy drugs outside of 340B for their Medicaid patients, states may collect rebates on the drugs. The Health Resources and Services Administration keeps a Medicaid Exclusion File indicating which providers have decided to use 340B drugs for Medicaid fee for service patients (“carve in”). HRSA instructs states to rely on this file to exclude 340B-purchased drugs from their rebate requests.
HRSA began auditing 340B covered entities in early 2012, partially to determine whether they report their carve-in/carve-out status accurately in the Medicaid Exclusion File. Prior OIG reports also reported concerns by states about the file’s accuracy. To improve accuracy, Congress changed the law in 2010 to require HRSA to annually update provider information, including whether program participants use 340B drugs for Medicaid patients. HRSA began an annual recertification process for all providers in 2012. Hospitals are currently undergoing this yearly requirement for the third time.
Groups representing 340B providers say they have been concerned about Medicaid duplicate discounts on 340B-purchased Medicaid managed care drugs for quite some time. They said they have raised these concerns with both the Centers for Medicare & Medicaid Services and HRSA and have invited the agencies to speak on the topic at events. Joseph Fine, acting pharmacy division director within CMS’s Center for Medicaid and CHIP Services, explained CMS’s position on the duty to prevent 340B duplicate discounts on Medicaid managed care claims during a July 16 session at the 340B Coalition annual conference in Washington, D.C.
In its new report, OIG said some states find “it can be difficult to ensure that all drugs that receive an upfront discount under the 340B program are excluded from the rebate invoice.” States told OIG that, to help them exclude 340B-purchased drugs from rebate requests, CMS should work with HRSA to improve the accuracy of the Medicaid Exclusion File and to encourage requiring pharmacies to identify 340B-purchased drugs on claims.
OIG concurred, saying “CMS should inform states of the option for them to identify, at the claim level, 340B-purchased drugs that are ineligible for rebates. States can instruct covered entities to use the industry-accepted standard to identify Medicaid claims for 340B-purchased drugs.”
OIG noted that “CMS indicated that it is working with HRSA regarding guidance” on 340B-purchased drugs. “OIG encourages CMS to continue working with HRSA to finalize the guidance and ensure that the guidance addresses how to flag claims for 340B-purchased drugs,” the study said.
In its comments on the study, CMS observed that it issued guidance to states in October 2012 regarding identifying 340B claims. In that program notice, CMS said that, in addition to using HRSA’s Medicaid Exclusion File, states have other options, such as instructing covered entities to use the National Council for Prescription Drug Plans Telecommunication Standards to identify 340B claims.
Groups representing 340B providers, meanwhile, have suggested options to identify 340B managed care claims, other than relying on the Medicaid Exclusion File or NCPDP standards. Provider groups report that at least one state Medicaid agency has covered entities submit spreadsheets outlining their non-340B claims. Provider groups also say they have heard of other states permitting separate Medicaid billing numbers for 340B claims. [/ms-protect-content]