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CMS Revises Part B Inflation Rebate Guidance for 340B Modifiers

The Centers for Medicare & Medicaid Services’ (CMS’) updated Medicare Part B Inflation Rebate Guidance includes revised requirements for the use of 340B Drug Pricing Program modifiers.  

The Inflation Reduction Act requires drug manufacturers to pay a rebate to Medicare for Part B drugs if the average increase in total allowed charges for the drug outpaces inflation increases each year. In February, CMS provided initial guidance on how the program will work and key dates for implementation. 

The Part B inflation rebates specifically exclude units of drugs that are provided a discount under the 340B program. To implement the exclusion of 340B drugs effectively, providers must identify 340B drugs on Medicare claims so those units can be subtracted from the total number of units for which a manufacturer otherwise may have a Part B inflation rebate liability. 

CMS’ guidance now requires all 340B entities — including those not paid under the Outpatient Prospective Payment System — to begin using 340B modifiers by Jan. 1, 2024. 

The following provider types now are required to report the “TB” modifier for separately payable drugs acquired through the 340B program:  

  • *Critical access hospitals. 
  • *Maryland All-Payer or Total Cost of Care Model hospitals. 
  • *Non-excepted off-campus provider-based departments. 
  • Rural sole community hospitals. 
  • Children’s hospitals. 
  • Prospective Payment System-exempt cancer hospitals. 

*Indicates provider types that did not previously report the “TB” modifier.  

All other 340B covered entities, including disproportionate share hospitals, are required to report the “JG” modifier for separately payable drugs acquired through the 340B Program. The requirement also applies to entities currently not reporting a 340B modifier, such as Ryan White clinics and hemophilia clinics. 

CMS previously used the JG and TB modifiers from 2018 to 2022 for the agency’s now-overturned policy to reduce Part B drug payments to 340B hospitals. According to the guidance, the continued use of these modifiers will have no effect on OPPS payment rates. The modifiers will be used to identify 340B drugs, ensuring that no duplicate discounts are given from the Part B inflation rebates. In addition, CMS will continue to use the data to track the utilization of 340B-acquired drugs and biologicals for informational purposes. 

CMS also published FAQs about the updated guidance on the usage of 340B modifiers.  

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


About the Author

Faridat Animashaun is a policy associate at America's Essential Hospitals.

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