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340B Drug Pricing Program
Learn about the federal 340B program, how it overlaps with the Medicaid Drug Rebate Program (MDRP), and what you need to know to avoid duplicate discounts.
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The 340B Drug Pricing Program is a federal program created in 1992 for section 340B(a)(4) of the Public Health Service Act (PHSA). The program requires drug manufacturers to provide outpatient drugs to eligible health care organizations and covered entities at significantly reduced prices.
(For more information, see the Health Resources and Services Administration’s (HRSA) 340B Drug Pricing Program webpage.)
How to participate
Participation in the 340B program is voluntary. To purchase drugs at the 340B price, you or your organization must register with the Health Resources and Services Administration (HRSA), and meet and maintain certain requirements with HRSA and the 340B Office of Pharmacy Affairs Information System (OPAIS).
When an eligible organization enrolls in the 340B program they must decide whether they will “carve-in” and use 340B purchased drugs for Washington Apple Health (Medicaid) clients, or “carve-out” and purchase drugs outside the 340B program.
If you and your organization carve-in, you are carving-in for both fee-for-service (FFS) and managed care (MCO) .
The Medicaid Drug Rebate Program (MDRP) is a federal program authorized by Section 1927 of the Social Security Act. The program requires drug manufacturers to participate in a rebate program with state Medicaid agencies in exchange for coverage of most of their drugs.
(See Medicaid.gov’s Medicaid Drug Rebate Program webpage for more information.)
Duplicate discounts—which are prohibited by federal law—occur when:
- A covered entity enrolled in the 340B program receives a discount from a manufacturer for a Medicaid client, and
- The state Medicaid agency (in Washington, the Health Care Authority) receives a rebate from the same manufacturer for the same client.
When you or your organization enroll in the 340B program and "carve-in" for Medicaid, you receive discount drugs for all Apple Health clients—both FFS and MCO. At the same time, the Health Care Authority (HCA) adds your Medicaid provider number or National Provider Identifier (NPI) to HRSA's Medicaid Exclusion File (MEF), thereby removing you from HCA's manufacturer invoicing.
To avoid duplicate discounts, ensure that you carve-in for both FFS and MCO and bill the state at Actual Acquisition Cost (AAC).
Note: Contract pharmacies are not permitted to bill Medicaid for drugs purchased at 340B pricing. This includes both FFS and MCO.
Find out if your organization is eligible to participate in the 340B program and review the federal and state requirements to avoid duplicate discounts.
Section 340B(a)(4) of the Public Health Service Act specifies which health care organizations and covered entities are eligible to participate in the 340B Drug Pricing Program. These include qualifying hospitals, federal grantees from HRSA, the Centers for Disease Control and Prevention (CDC), the Department of Health (DOH) and Human Services' Office of Population Affairs, and the Indian Health Service.
- Children's hospitals
- Critical access hospitals
- Disproportionate share hospitals
- Free standing cancer hospitals
- Rural referral centers
- Sole community hospitals
- Federally Qualified Health Centers (FQHC)
- FQHC look-alikes
- Tribal/Urban Indian Health Centers
- Black lung clinics
- Comprehensive hemophilia diagnostic treatment centers
- Title X family planning disease clinics
- Sexually transmitted disease clinics
- Tuberculosis clinics
- Ryan White HIV/AIDS Program grantees
- Upon enrollment in the 340B program, covered entities must determine if they will participate and use 340B purchased drugs for Apple Health patients. This practice of participation is commonly referred to as “carving-in”. When a provider chooses to “carve-out”, they will need to purchase drugs outside of the 340B program.
- Covered entities are responsible for maintaining the accuracy of their information on the Medicaid Exclusion File (MEF).
- Eligible covered entities must recertify their eligibility with HRSA every year and notify the Office of Pharmacy Affairs whenever there is a change in their eligibility. Changes in eligibility status could require the covered entity to stop purchasing drugs through the 340B program.
- Manufacturers are permitted to audit covered entities’ records if they suspect product diversion or that multiple discounts are taking place. Covered entities must have procedures in place to prevent duplicate discounts.
- All claims from Medicaid provider numbers and NPIs listed as participating with Medicaid are excluded from drug rebate invoicing. Utilization from billing IDs which are not properly identified on the Medicaid Exclusion File (MEF) are included in rebate invoicing. This is true for both MCO and FFS.
- Covered entities which choose to participate and carve-in with Apple Health should bill the state at Actual Acquisition Cost (AAC) for FFS. MCO claims should be submitted per the plans 340B billing guidelines.
- Washington does not support 340B contract pharmacies and has administrative code making clear that drugs purchased under section 340B of the PHSA can be billed to the agency only by the PHS-qualified entities themselves. This also applies to both MCO and FFS claims.