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Medicaid rebates central to the concern over 340B drug program, survey shows

Different states have different methods for identifying 340B drugs billed to programs, findings showed.

A new survey released this week is seeking to clarify much about the controversial 340B outpatient drug discount program, which has the industry split over its potential for abuse by hospitals.

The "Comprehensive 50-State Survey: State Medicaid Programs and 340B," by Manatt Health, looks at how each state governs Medicaid reimbursement for 340B drugs.


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Medicaid rebates are central to the debate over 340B.

The survey spotlights the interplay between the 340B program and rebates, which are paid by manufacturers to states for drugs dispensed to Medicaid patients. The 340B statute provides that a drug may not be subject to both a 34B discount and a Medicaid rebate. States should have a mechanism in place to identify 340B drugs to exclude them from rebate requests.

To identify 340B drugs billed to programs, 22 states rely solely on claims-level identifiers, while 12 rely on the federal Office of Pharmacy Affairs Medicaid Exclusion File. Some states rely on both. Almost two thirds of states prohibit 340B contract pharmacies, according to the survey.

Other techniques for identifying 340B drugs dispensed by contract pharmacies include requiring contract pharmacies to bill for 340B drugs using a different NPI or provider number.

One state prohibits all covered entities from using 340B drugs for Medicaid beneficiaries, the survey shows, while another state permits 340B drugs for family planning clinics only.

Medicaid programs reimburse for 340B drugs at the actual acquisition cost, but dispensing fees vary, according to the survey. Most states can set fees between $10 to $11 per prescription, but fees can be as low as $2.32 and as high at $21.28.


The 340B program was established in 1992 to help hospitals provide outpatient drugs to vulnerable populations. Hospitals get reimbursed from the government at a higher price than what they're charged, using the difference to cover the cost of care for patients who don't have the ability to pay. Critics say the system has become a cash cow for hospitals, however, particularly when they prescribe more expensive drugs.

Manatt Health, the healthcare legal and consulting group part of Manatt, Phelps and Phillips, LLP, conducted the survey to better inform industry members, and said by statement that both sides can agree the program can be "very confusing to navigate."


"Given the controversy that has surrounded the 340B program over the years and the complex interplay between it and Medicaid, we were committed to bringing much needed clarity to the issues," said Helen Pfister, partner with Manatt Health and lead author of the report. "We felt this survey was particularly important in order to help 340B stakeholders understand what the legal framework is at the state level when it comes to Medicaid and 340B."

Max Sullivan is a freelance writer and reporter who, in addition to writing about healthcare, has covered business stories, municipal government, education and crime. Twitter: @maxsullivanlive