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State Efforts to Exclude 340B Drugs from Medicaid Managed Care Rebates

Drug Pricing and Payment Portfolio


Manufacturer rebates for drugs paid through Medicaid managed care organizations (MCOs) are an increasingly important source of savings for both States and the Federal government. However, "duplicate discounts," which occur when manufacturers pay Medicaid rebates on drugs sold at the already discounted 340B price, are prohibited by law. Thus, for States to collect allowable rebates only and avoid duplicate discounts for drugs paid through MCOs, they must identify and exclude 340B drug claims. If a State does not accurately identify 340B drug claims, both duplicate discounts and forgone rebates-that is, unclaimed rebates to which States are legally entitled-may occur. Duplicate discounts result in manufacturers paying too much in rebates, while forgone rebates result in States paying too much for drugs.


We conducted structured interviews with States that pay for drugs through MCOs to determine how they identify 340B drug claims when collecting Medicaid rebates. We assessed States' methods and identified potential vulnerabilities that could inhibit correct rebate collection. We did not attempt to determine whether duplicate discounts for MCO drugs had occurred.


We found that, to identify 340B drug claims and correctly collect rebates for MCO drugs, most States use methods that identify providers using 340B purchased drugs. However, we found that these provider level methods may not accurately identify all individual 340B drug claims, creating a risk of duplicate discounts and forgone rebates. By contrast, we found that methods that operate at the claim level can improve accuracy in identifying 340B drug claims, and thereby, help States correctly collect rebates.


We recommend that the Centers for Medicare & Medicaid Services (CMS) require States to use claim level method to identify 340B claims. CMS did not concur with our recommendation, noting that while it agrees with the importance of claim level methods, the statute does not contemplate such a requirement for States. We continue to recommend that CMS require the use of claim level methods to improve accuracy in identifying 340B claims and thereby reduce the risk of duplicate discounts and forgone rebates.

We also recommend that the Health Resources and Services Administration (HRSA) clarify its guidance on preventing duplicate discounts for MCO drugs to align with this new requirement. HRSA concurred with our recommendation.