July 8, 2011—The Centers for Medicare and Medicaid Services (CMS) should take action against states that are not collecting Medicaid rebates on physician-administered drugs bought outside of the 340B program, the U.S. Department of Health and Human Services Office of Inspector General (OIG) recommends in a new report. As a result, some hospitals may see greater activity by their state Medicaid programs in this area.
According to OIG, 31 states lack a way to identify “carved out” claims for physician-administered drugs submitted by 340B providers and/or do not require the providers to put National Drug Codes (NDCs) on such claims. “Without edits to identify the claim itself or an NDC to identify the correct manufacturer to invoice, it would [be] very difficult, if not impossible, for states to collect the rebates,” OIG said.
Federal law requires states to collect rebates on certain physician-administered drugs and include NDCs on claims for such drugs. States, however, may not collect rebates on 340B—purchased drugs because doing so would require drug manufacturers to pay duplicate discounts in violation of federal law.
But if 340B hospitals do not use 340B pricing when buying drugs for Medicaid recipients, a practice commonly referred to as the Medicaid carve out, states would have to require the hospitals to submit NDCs for such drugs in order to collect rebates on them.
OIG said CMS should help states develop ways to identify carved-out Medicaid claims and take action against those that fail to collect rebates on carved—out physician-administered drugs. CMS concurred with both recommendations.