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CMS Issues 340B Duplicate Discount Guidance

In an informational bulletin to state Medicaid agencies, the Centers for Medicare & Medicaid Services (CMS) outlines best practices to prevent duplicate discounts on drugs purchased through the 340B Drug Pricing Program.

Statute prohibits states from receiving a Medicaid rebate on drugs that covered entities purchase with a 340B discount. The bulletin offers various policy options states can use to prevent duplicate discounts through Medicaid fee-for-service (FFS) and managed care.

Of particular note, the guidance discusses using Medicaid state plan amendments to mandate that providers carve out their Medicaid patients from receiving 340B drugs.

The guidance also covers the use of the Medicare JG and TB modifiers, which CMS requires as part of its Medicare Part B payment cuts to 340B hospitals. Particularly, the guidance notes that states can use these modifiers to determine when a patient eligible both for Medicare and Medicaid has received a 340B drug. CMS also notes that states could use the TB modifier on their Medicaid claims for physician-administrated drugs purchased with 340B discounts.

In addition to these mechanisms to avoid duplicate discounts, the bulletin covers:

  • strategies for preventing duplicate discounts on drugs dispensed by contract pharmacies;
  • the use of the Medicaid exclusion file (MEF) to determine which FFS providers carve-in, or use 340B drugs for their Medicaid patients. CMS emphasizes the MEF is meant to be used in Medicaid FFS and not managed care;
  • various claims identifiers, including the National Council for Prescription Drug Programs (NCPDP) modifiers and the UD modifier, which many states use. CMS notes that the NCPDP submission codes also can be used retroactively, as identification of 340B drugs in the pharmacy context is difficult to do at the point of service;
  • the option for states to share claims-level data with manufacturers to help ensure manufacturers are not providing rebates on drugs that already received a 340B discount; and
  • the use of unique beneficiary identifiers to help identify managed-care beneficiaries at the point of service.

The informational bulletin comes in response to two Office of Inspector General reports, most recently in 2016, that directed CMS to provide more guidance to states on preventing duplicate discounts.

America’s Essential Hospitals will continue to monitor this issue and encourages its members to provide  feedback on whether their states are using these methods, or any other mechanisms, to prevent duplicate discounts.

Contact Senior Director of Policy Erin O’Malley at or 202.585.0127 with questions.


About the Author

Shahid Zaman is a senior policy analyst at America's Essential Hospitals.

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