The 340B Drug Pricing Program (340B) prohibits duplicate discounts, which occur when a covered entity obtains a 340B discount on a medication and a Medicaid agency obtains a discount in the form of a rebate from the manufacturer for the same medication. Covered entities must have mechanisms in place to prevent duplicate discounts.1
Congress enacted Section 340B of the Public Health Service Act (PHSA), created under Section 602 of the Veterans Health Care Act of 1992. Section 340B requires pharmaceutical manufacturers to enter into an agreement, called a pharmaceutical pricing agreement (PPA), with the HHS Secretary in exchange for having their drugs covered by Medicaid and Medicare Part B.
In 2010, Congress mandated the creation of a dispute process to settle claims by covered entities of being overcharged for 340B drugs and claims by drug companies of diversion or duplicate discounts.
The 340B program is intended to “stretch scarce federal resources” and incentivize care for vulnerable populations.2 The recent growth in the program may be indicative of entities veering from this tenet and use of discounts to retain greater profits.
The Medicaid Drug Rebate Program (MDRP) and 340B both require drug manufacturers to provide discounts on their products. The duplicate discount prohibition is intended to protect manufacturers from giving a 340B discount and Medicaid rebate on the same drug.2 To comply with the prohibition, covered entities must elect whether to carve in by using 340B drugs for their Medicaid patients. To carve in drugs dispensed or administered at a hospital location or an entity-owned pharmacy, an entity must inform the OPA it will carve in and ensure the numbers used to bill 340B drugs to FFS Medicaid are listed in OPA’s Medicaid Exclusion File. This allows state Medicaid agencies to exclude claims billed under those numbers from their rebate requests. Some states impose additional notification requirements (e.g. requiring the use of a modifier) on 340B claims. For drugs dispensed by a contract pharmacy, a covered entity may not carve in unless the entity, state Medicaid program, and contract pharmacy have established an arrangement to prevent duplicate discounts and notified the Office of Pharmacy Affairs (OPA) of the arrangement.3 Covered entities can carve out and purchase their Medicaid covered outpatient drugs outside the 340B program through the MDRP. The Health Resources and Services Administration (HRSA) audits covered entities to make sure they are compliant with the program. Manufacturers can also audit covered entities if they demonstrate reasonable cause and received approval of an audit work plan from the HRSA. Manufacturers can only audit covered entities for compliance with patient definition and the duplicate discount prohibition.2
Sales for 340B had grown 17.1% year-on-year in 2019 and accounted for $67.4B of pharma sales. Sales for the 340B Program hit $80.1B in 2020, an 18.1% year-on-year growth versus 2019. Since 2017, 340B sales have grown 76%.4
The OPA has 22 full time equivalent employees and conducts 200 covered entity audits annually (HRSA 2017a). Since 2012, HRSA has audited no more than 200 covered entities annually. With growth in 340B participation along with the limited number of audits have led some to question whether HRSA is providing adequate oversight of the program.2
1. 340B Prime Vendor Program | 340B Drug Pricing Program Partner. 340bpvp.com. https://www.340bpvp.com/hrsa-faqs/medicaid/duplicate-discounts. Published 2021.
2. The 340B Drug Pricing Program And Medicaid Drug Rebate Program: How They Interact. Washington DC: Medicaid and CHIP Payment Access Committee; 2018. https://www.macpac.gov/wp-content/uploads/2018/05/340B-Drug-Pricing-Program-and-Medicaid-Drug-Rebate-Program-How-They-Interact.pdf.
3. Detailed Overview - 340B Health. 340bhealth.org. https://www.340bhealth.org/members/340b-program/overview/. Published 2021.
4. Martin R. Growth of the 340B Program Accelerates in 2020. US Blogs. 2021. https://www.iqvia.com/locations/united-states/blogs/2021/03/growth-of-the-340b-program-accelerates-in-2020.