The 340B drug pricing program, enacted in 1992, provides discounts on outpatient drugs to safety-net providers (called 340B covered entities) who meet certain qualifications. Covered entities use the savings from the program to stretch scarce federal resources and invest in patient care. With new requirements around Medicaid managed care patients who are also 340B eligible, this a good time to make sure you understand how your 340B solution is managing important program compliance elements.

There are many important nuances in the program for healthcare organizations to follow, highlighting the importance of having information systems in place that can manage all the aspects of the program.

An important compliance element in the 340B program is the prevention of duplicate discounts. A provision in federal law—42 USC 256b(a)(5)(A)(i)—prohibits duplicate discounts, which means that manufacturers are not required to provide a discounted 340B price and a Medicaid drug rebate for the same drug. Covered entities must have systems in place to prevent duplicate discounts.

A duplicate discount can occur if a 340B qualified patient with Medicaid (either fee-for-service or managed Medicaid) fills a prescription at a contracted pharmacy of the covered entity, and the drug is replenished using 340B pricing but the state also requests a Medicaid rebate from the manufacturer on that same drug. To prevent the state from applying for a Medicaid rebate for a drug replenished at 340B pricing, covered entities are responsible for identifying and reporting to the state information on Medicaid claims in which 340B pricing was used – including Medicaid managed care claims. 340B drugs should not be used in a contract pharmacy situation for Medicaid patients unless there is an arrangement to prevent duplicate discounts that has been reported to the Health Resources and Services Administration (HRSA) in collaboration with the state Medicaid agency.

With the expansion of Medicaid in 32 states and the fact that many Medicaid beneficiaries are treated by covered entities enrolled in the 340B program, developing and implementing processes to ensure the prevention of duplicate discounts is more important than ever. The majority of Medicaid beneficiaries are enrolled in Medicaid managed care plans.

Before the Affordable Health Care Act became law in 2010, 71 percent of Medicaid beneficiaries nationwide were already enrolled in Medicaid managed care plans, up from 58 percent in 2001. This is definitely a trend that will continue.

Since the inception of 340B, covered entities have maintained sole responsibility for 340B program compliance. However, the new CMS payment reform for Medicaid includes a provision that makes duplicate discount prevention for Medicaid managed care claims a joint responsibility between the covered entity and the Medicaid managed care organization. When the rule goes into effect in July, MCOs can now be held liable for compliance violations. Not only will this put pressure on MCOs to get more involved in 340B program management, but covered entities will also face increased pressure in certain aspects of the program such as data and reporting.

Almost all 340B covered entities use a 340B third party administrator (TPA) or solution vendor to help them determine eligibility, prevent duplicate discounts and diversion, and manage inventory. With MCOs becoming an integral player in 340B program compliance, there will be significant pressure on covered entities to report 340B and Medicaid data to managed care organizations.

These new complexities make selecting the right 340B solution vendor more important than ever. I’ve learned through my audit experience that not all 340B solutions are created equal, and more importantly, that not all covered entities actually understand how their chosen solution works. This is a good time for covered entities to take an in-depth look at their 340B solution vendor, and ask some key questions to ensure that the solution can appropriately address these new requirements and keep everyone compliant.

Below are four basic questions that I would encourage covered entities to address with their 340B TPA. Don’t accept vague answers or push back. At the end of the day, 340B program compliance is your responsibility, and if your vendor is not able to provide you with answers to these fundamental questions, it may be time to look for a new vendor who can.

What data is available in your 340B solution?
Data is key to the success of a 340B software solution; the filters/configurations used to determine eligibility are only as good as the data behind them. When I conduct mock audits, I’m always amazed by how little data some 340B software vendors use to make important eligibility determinations. Below are some specific questions I would recommend addressing in terms of data:

  • What data are you sending to your 340B solution vendor and how is it being sent?
  • How often does your vendor update your system with the data you are sending?
  • How is this data used to determine eligibility?
  • What filters and configurations does your vendor offer?
  • How can you change a filter or configuration?
  • How long does it take for changes to take effect in the system?
  • How can you view data and report on it?

What is the update process for data and lists? Does your 340B solution vendor provide automatic updates, or is the ownership on the covered entity to update the data manually?
There’s not necessarily a right or wrong answer here, but it’s important to understand exactly what data you are responsible for maintaining. One key data element where I’ve seen variance among vendors is Medicaid exclusion lists. Some vendors maintain and automatically update these lists for their clients, while others put the ownership on the covered entity to develop the exclusion list and make updates when needed, such as when a new plan is added. If your vendor requires you to keep your Medicaid exclusion list updated, they should be able to give you a clear answer on exactly what data you need to provide, how long will it take your vendor to make any change needed to your list and how often should you be checking if new plans are being added in the state(s).

Does your vendor provide 340B compliance and program management expertise?
340B is a complex program with requirements that vary by entity type and state Medicaid rules, and no 340B solution should be one-size-fits-all. It is important for your vendor to be able to understand and assist you in navigating the nuances of the 340B program, and offer filters and configurations that you can apply in order to address your specific needs and requirements. All states have different regulations when it comes to using 340B drugs for Medicaid fee-for-service and Medicaid managed care patients. For example, New York requires covered entities who elect to use 340B drugs for Medicaid patients at retail contract pharmacies to use them for both Medicaid fee-for-service and Medicaid managed care patients. Your vendor should have experts available who can help you understand, navigate and properly address the requirements that apply to the states in which you are treating Medicaid patients.

Are data and reports easily accessible for audit purposes?
External auditors never want to hear “The information you’re looking for in our 340B solution somewhere, I just don’t know where to find it.” If you don’t know how to access your data, it might as well not exist from an auditor’s perspective. Be sure that your 340B vendor educates you how to navigate their application and access critical information about the payer, prescriber, pill and patient for each 340B prescription. You should be able to quickly and easily produce this information on demand. Some additional considerations to address: Does your vendor indicate the payer on 340B approved claims? Can you identify the bank identification number (BIN), processor control number (PCN) and group number on the claim and scrub the data against your Medicaid exclusion list to ensure claims are not going through that have these identifiers?

Many hospitals and health centers that participate in the 340B program would not be able to keep their doors open without the savings from 340B. While 340B program management does come with certain complexities, it is well worth the time and effort to work through them with your software vendor in order to capture eligible drug cost savings that you can use to expand care to your patients.

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