The 340B Drug Pricing Program requires drug manufacturers to provide outpatient drugs to eligible healthcare organizations/covered entities at significantly reduced prices. We should be asking FQHC and PBB clients if they participate in the 340B Program. National Drug Codes (NDCs) are to be reported on all 340B Program drugs regardless of the revenue code.
To participate in the 340B Program, eligible organizations/covered entities must register and be enrolled with the 340B program and comply with all 340B Drug Pricing Program requirements. Once enrolled, covered entities are assigned a 340B identification number that vendors verify before allowing an organization to purchase 340B discounted drugs.
Facilities that believe they meet the criteria of a “covered entity” can apply to participate in 340B by completing the online registration process during the first two weeks of any calendar quarter (e.g., January 1-15, April 1-15, etc.). Facilities whose registrations are approved by Office of Pharmacy Affairs (OPA) are listed on the OPA database and eligible for discounts starting the first day of the next calendar quarter following the one during which an entity completed the registration process. Once admitted into the program, covered entities are entitled to receive discounts on all covered outpatient drugs. Covered entities may provide drugs purchased through the 340B Program to all eligible patients, regardless of a patient’s payer status and whether the drug is intended for self-administration or administration by a clinician.
The 340B discount is the average manufacturer price (AMP) reduced by a minimum rebate percentage of 23.1 percent for most brand-name prescription drugs, 17.1 percent for brand-name pediatric drugs and clotting factor, and 13 percent for generic and over-the-counter drugs. Manufacturers must offer greater discounts on brand-name drugs if the manufacturer’s best price for a drug is lower than AMP minus 23.1 percent for that drug and/or the price of the drug has increased more quickly than the rate of inflation.
This is true for single-source, brand-name drugs and brand-name drugs that have generic competition. In addition, covered entities are free to negotiate discounts that are lower than the maximum allowable statutory price. The discounted prices are typically available through a covered entity’s wholesaler unless the manufacturer requires that its drugs be purchased through some other channel, such as a specialty distributor.
Covered Entities:
- Federally Qualified Health Centers
- Federally Qualified Health Center Look-Alikes
- Native Hawaiian Health Centers
- Tribal -/- Urban Indian Health Centers
- Ryan White HIV/AIDS Program Grantees
- Hospitals
- Children’s Hospitals
- Critical Access Hospitals
- Disproportionate Share Hospitals
- Free-Standing Cancer Hospitals
- Rural Referral Centers
- Sole Community Hospitals
- Black Lung Clinics
- Comprehensive Hemophilia Diagnostic Treatment Centers
- Title X Family Planning Clinics
- Sexually Transmitted Disease Clinics
- Tuberculosis Clinics
Eligible Drugs
Generally, the 340B Program covers the following outpatient drugs:
- FDA-approved prescription drugs;
- Over-the-counter (OTC) drugs written on a prescription;
- Biological products that can be dispensed only by a prescription (other than vaccines); or
- FDA-approved insulin.
Medicaid Billing
Social Security Act 42 USC 256b (a) (5) (A) (i) prohibits duplicate discounts; that is, manufacturers are not required to provide a discounted 340B price and a Medicaid drug rebate for the same drug. Covered entities must have mechanisms in place to prevent duplicate discounts. All covered entities that use 340B and bill Medicaid must follow these rules: Upon enrollment in the 340B Program, covered entities must determine whether they will use 340B drugs for their Medicaid patients (carve-in) or whether they will purchase drugs for their Medicaid patients through other mechanisms (carve-out).
Covered entities that will carve-in are required to inform Health Resources and Services Administration (HRSA) (by providing their Medicaid provider number/NPI) at the time they enroll in the 340B Program that they will purchase and dispense 340B drugs for their Medicaid patients. If covered entities decide to bill to Medicaid for drugs purchased under 340B with a Medicaid provider number/NPI, then ALL drugs billed to that number must be purchased under 340B and that Medicaid provider number/NPI must be listed on the HRSA Medicaid Exclusion File.
For covered entities that opt to purchase Medicaid drugs outside of the 340B Program, e.g., carve-out Medicaid prescriptions, ALL drugs billed under that Medicaid provider number/NPI must be purchased outside the 340B Program, and that Medicaid provider number/NPI should not be listed on the HRSA Medicaid Exclusion File.
Medicare Billing
Medicare Part B pays for certain 340B drugs provided by covered entities to beneficiaries, such as drugs used to treat cancer and rheumatoid arthritis. Medicare pays the same amounts for Part B drugs to 340B hospitals and non-340B hospitals, even though 340B hospitals are able to purchase outpatient drugs at steep discounts. From 2004 to 2013, Medicare spending in nominal dollars for Part B drugs at hospitals that participate in 340B grew from $0.5 billion to $3.5 billion, or 543 percent. Hospitals in the 340B program accounted for 22 percent of Medicare spending for Part B drugs at all Medicare acute care hospitals in 2004, growing to 48 percent in 2013. Some of this growth was due to an increase in the number of participating hospitals as a result of the Patient Protection and Affordable Care Act (PPACA), which expanded the types of hospitals eligible for 340B. However, most of the growth in Medicare spending occurred among hospitals that were in the 340B program before PPACA. For example, 733 hospitals in the 340B program received Medicare payments for separately payable Part B drugs in both 2008 and 2013. These hospitals accounted for 73 percent of the growth in Medicare spending for separately payable Part B drugs at all 340B hospitals from 2008 to 2013.
Covered entities are allowed to provide 340B drugs only to individuals who are “patients” of the entity, but the statute does not define who should be considered a patient of the entity. HRSA has outlined three criteria for who is an eligible patient, but some of these criteria are not clearly defined. As noted by the Government Accountability Office, the lack of specificity in the guidelines for who is an eligible patient makes it possible for covered entities to interpret this term either too broadly or too narrowly. HRSA plans to clarify the definition of eligible patients in proposed guidance in 2015.