On May 26, 2023, the Centers for Medicare and Medicaid Services (CMS) proposed an update to the Medicaid Drug Rebate Program (MDRP) rules, which includes provisions aimed at preventing 340B duplicate discounts on claims billed to Medicaid managed care organizations (MCOs). Duplicate discounts arise when both 340B discounts and Medicaid rebates are provided by a manufacturer for the same drug. Although drug manufacturers that participate in Medicaid are required to provide discounts on 340B drugs under the 340B Drug Pricing Program and are also required to provide state Medicaid programs with rebates under the MDRP on drugs dispensed to Medicaid beneficiaries, including Medicaid MCO enrollees, manufacturers are not required to provide both a 340B discount and a Medicaid rebate under the MDRP for the same drug.

IN DEPTH

Because the relevant statutory provisions do not clearly articulate whether the state Medicaid program, the Medicaid MCO or the 340B-participating provider (covered entity) is responsible for ensuring that duplicate discounts do not occur for Medicaid MCO claims, there currently is no uniform system for identifying Medicaid MCO claims for 340B drugs. In the years since Medicaid MCO drugs became eligible for rebates under the MDRP, the US Department of Health and Human Services (HHS) has generally encouraged the relevant stakeholders and affected parties to work together to develop a solution. To date, that has not occurred. It appears that HHS may finally be stepping in to develop, or at least work towards, a solution.

Under the proposed rule, CMS would modify the standard Medicaid MCO contract requirements to require Medicaid MCOs that provide coverage of covered outpatient drugs to use unique, Medicaid-specific codes and group numbers on beneficiary insurance cards. The use of these identifiers would assist state Medicaid programs, MCOs and 340B covered entities to identify Medicaid MCO claims that might not otherwise be readily apparent as Medicaid MCO claims. Currently it is not uncommon for Medicaid MCOs to use the same group identifiers as claims for patients with private insurance. If implemented as proposed, the various stakeholders could more efficiently develop additional tools to identify such claims as being for 340B drugs or to exclude such claims for being filled using 340B drugs. CMS indicated that this change would allow the MDRP to run more efficiently, and would be helpful to all parties by ensuring that Medicaid rebates and 340B discounts are being provided appropriately. CMS proposed that this new requirement be implemented into Medicaid MCO contracts no later than the next rating period, following the effective date of the final rule adopting this provision.

While the proposed rule would provide an important tool to assist in the development of additional policies to prevent duplicate discounts on Medicaid MCO claims, it would not itself effectuate a full solution. The proposed rule also does not address the ongoing concern among 340B covered entities that state Medicaid programs or Medicaid MCOs could expand 340B “carve out” requirements or reduce reimbursement rates on 340B drugs dispensed to Medicaid MCO enrollees, thereby removing the opportunity for 340B covered entities to obtain the benefit that Congress intended for them to receive through the 340B Program—i.e., generating revenue from 340B drug sales to enable 340B covered entities to provide and expand services in their communities.

CMS solicited comments on the proposed change by July 25, 2023, and specifically requested comments regarding the implementation timeframe and operational issues that may arise from requiring the inclusion of unique Medicaid identifiers on Medicaid MCO beneficiary identification cards.