Index

The 340b Drug Pricing Program is a federal program overseen by the Health Resources and Services Administration (HRSA) Office of Pharmacy Affairs. The program requires drug manufacturers to provide outpatient drugs to certain health care entities at significantly reduced prices so the remaining funds can provide services for more eligible clients and provide more comprehensive services. This process allows Medicaid to share in the savings generated by the 340B Program.  340b refers to the section of the Public Health Service Act requirements.

Providers eligible for the 340B program are called covered entities. Federal law requires covered entities to include hospitals and other federal grantees. Each type of covered entity has rules regarding its participation in the program.

Pharmacies identified as a Federally Qualified Health Center (FQHC) do not qualify for reimbursement through Medicaid. FQHCs are reimbursed by a total encounter rate for all services under the Veterans Health Care Act of 1992.

Refer to the HRSA website at hrsa.gov/opa/ for educational resources, eligibility requirements, FQHC information, and registration information about the 340B program.

340B Participation

Covered entities must first enroll in the 340B Program. HRSA assigns the covered entity an identification number upon enrolling in the program. Drug manufacturers use this number to verify the covered entity is allowed to purchase 340B purchased drugs. In addition, each covered entity must designate with HRSA whether it will use 340B discounted drugs and the 340B pricing to bill Medicaid.

HRSA does not specify how covered entities should implement 340B. If the covered entity complies with all 340B Program requirements, it can implement its 340B procedures. Most covered entities choose one or more of the following options to provide outpatient drugs to their clients:

  • In-house pharmacy: the covered entity owns drugs, pharmacy, and license; purchases drugs; is fiscally responsible for the pharmacy; and pays the pharmacy provider.
  • Contract pharmacy services: the covered entity owns drugs, purchases drugs, pays (or arranges for clients to pay) dispensing fees to one or more contract pharmacies, and contracts with a pharmacy to provide pharmacy services. Refer to Contracted Pharmacies for more information on this process.
  • Provider/In-house dispensing: the covered entity owns drugs, employs providers licensed in the state to dispense, holds a license for dispensing for the participating providers, and is fiscally responsible for operating and dispensing costs.

340B Contracted Pharmacies

Refer to the Enrollment section for information about how pharmacies enroll in Medicaid.

Many 340B covered entities elect to dispense 340B drugs to clients through contract pharmacy services. The 340B covered entity signs a contract with one or more pharmacies to provide these prescription services. A single covered entity with more than one 340B-eligible pharmacy may have individual contracts for each location or include multiple locations within a single pharmacy services contract. Covered entities are responsible for ensuring compliance of their contract pharmacy arrangement(s) with all 340B Program requirements.

The HRSA Contracted Pharmacies Database must include all contracted pharmacies associated with the covered entity. The covered entity is responsible for compliance with their contract pharmacy arrangement. Refer to the Provider Responsibilities section below for more information.

Covered entities can purchase, receive, and pay for drugs but request that the drugs ship directly to contracted pharmacies.

Refer to the "Notice Regarding 340B Drug Pricing Program - Contract Pharmacy Services" printed in the Federal Register (Vol. 75, number 43, pages 10272-9, March 5, 2010) at https://www.govinfo.gov/content/pkg/FR-2010-03-05/pdf/2010-4755.pdf for more information about the operation and compliance of contract pharmacies.

HRSA Audit Requirements

All covered entities must maintain auditable records and conduct annual audits of contract pharmacies. Independent outside auditors should review their compliance. The covered entity should disclose the finding to HRSA along with the covered entity's plan to address the finding. Refer to the HRSA website at https://www.hrsa.gov/opa/program-integrity/ or the specific MCO for its contract requirements for more information.

Annual HRSA Recertification

HRSA requires covered entities to annually recertify their eligibility to remain in the 340B Program and continue purchasing covered outpatient drugs at discounted 340B prices. As part of the recertification process, entities should ensure the following:

  • The HRSA database includes the 10-digit National Provider Identifier (NPI) and 6-digit HHSC-issued Medicaid vendor number
  • The entity answered "Yes" to the billing question on the Medicaid contract, "Will you bill Medicaid for drugs purchased at 340B prices?", if you plan to share the 340B savings with Medicaid
  • The HRSA quarterly Medicaid Exclusion file includes each of the entity's correct names and physical addresses

340B Pharmacy Claim Submission

Eligible entities with pharmacies participating in the 340B Program must identify all outpatient pharmacy claims filled with 340B purchased drugs for 340B-eligible clients, including fee-for-service Medicaid and managed care, by submitting a value of "20" (340B / Disproportionate Share Pricing/Public Health Service) in the "Submission Clarification Code" field (420-DK). Submitting this value prevents duplicate discounts.

The 340B statute prohibits duplicate discounts, which occur when a covered entity obtains a 340B discount on 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 such occurrences. Refer to the HRSA Duplicate Discount Prohibition page (hrsa.gov/opa/program-requirements/medicaid-exclusion/) for more information.

Pharmacy providers may not know at point-of-sale if a claim qualifies as a 340B claim. To qualify as a 340B claim, pharmacies must dispense 340B purchased drugs to a 340B eligible client. If the pharmacy submits the 340B claim without the Submission Clarification Code, the pharmacy must reverse and resubmit the claim once the pharmacy identifies the error. The manufacturer is invoiced if the pharmacy does not correct the claim. The pharmacy and the eligible entity may be held responsible for repaying any incorrectly invoiced amounts to the manufacturer. Manufacturers initially provide pharmacies with drugs at 340B prices, and pharmacies should not invoice the manufacturer after the sale for another rebate.

340B Pharmacy Reimbursement

Fee-For-Service Medicaid, CSHCN, HTW, and KHC

On June 1, 2016, HHSC began basing the reimbursement methodology for calculating the ingredient cost of 340B drugs for pharmacy claims paid to the covered entities on the Wholesale Acquisition Cost (WAC). The information below identifies the drug categories and reimbursement methodologies.

CategoryReimbursement
Human Immunodeficiency Virus productsWAC minus 40 percent
Hemophilia productsWAC minus 32 percent
Brands and genericsWAC minus 57 percent

HHSC reimburses new drugs on the market less than six months from the date added to the formulary at WAC minus 23.1 percent. After the drug’s new-to-market date reaches six months, HHSC will base the reimbursement on one of the categories listed in the table above. This methodology is not all-inclusive, and HHSC may price some products manually.

Managed Care

Beginning Dec. 1, 2014, MCOs can create their own 340B reimbursement methodologies. Pharmacy providers should contact the client's specific MCO for details.

A covered entity using 340B purchased drugs in Medicaid managed care must contract with the MCO as a 340B pharmacy and accept the payment terms of their shared-savings model. A shared savings model is an alternative payment model in which providers agree to share a percentage of the net savings they receive to a defined client population. If the covered entity does not accept the terms of an MCO's shared savings model to reimburse 340B purchased drugs, then the covered entity may choose to contract with the MCO as a retail pharmacy.

If the covered entity contracts with an MCO as a retail pharmacy, the entity cannot use 340B purchased drugs.

MCOs may deny claims submitted with a value of "20" for pharmacies not contracted as a 340B pharmacy because the pharmacy should not have filled the claim with 340B purchased drugs. An MCO cannot require its network pharmacy to submit its actual acquisition cost on outpatient drugs and biological products purchased through the 340B program.

Refer to the 340B Resources section for more about 340B claims processing.

340B Clinician-administered Drug Claim Submission

All covered entities must use the modifier "U8" when submitting medical claims for 340B clinician-administered drugs as of Sept. 1, 2015. Medical claims for clinician-administered drugs (CAD) (also known as physician-administered drugs) include Healthcare Common Procedure Coding System (HCPCS) codes listed on the Formulary search (txvendordrug.com/formulary/formulary-search). The CAD search identifies the relationship between a rebate-eligible NDC and HCPCS code.

Providers can access the NDC Requirements for the Submission of CAD Claims instruction within the TMHP Learning Management System (LMS) for detailed information about CAD claim submission. Refer to the TMHP Resources section for details about the TMHP LMS and how to register.

The covered entity must correctly submit claims filled with 340B drugs for 340B clients to ensure HHSC does not collect rebates for these drugs. Non-compliance with this requirement may jeopardize a covered entity's 340B status with HRSA. This modifier requirement for 340B clinician-administered drugs applies to Medicaid fee-for-service claims submitted to TMHP and Medicaid managed care claims submitted to the client's MCO.

Providers who believe NDCs are missing for a specific HCPCS procedure code can contact HHSC to request a review. The email should include the procedure codes and corresponding NDCs. Contact the Clinician-administered Drug Administration to request a HCPCS review.

For more information related to the submission of medical claims, call the TMHP Contact Center.

340B Drug Rebates

The HHSC drug rebate system receives all outpatient pharmacy and clinician-administered drug claims for all state-administered programs for invoicing. HHSC invoices drug manufacturers for claims when the state pays any amount after deductions for co-pay, coinsurance, or any other payment type. Any amount paid for dual-eligible clients, either directly by the state or through an MCO, is also invoiced if the state pays any amount.

Pharmacy Rebates Exclusions

HHSC only excludes pharmacy claims from the rebate collection process if the pharmacy submits a "20" in the "Submission Clarification Code" field (420-DK), required as of Jan. 1, 2014. It is the responsibility of the covered entity and their contracted pharmacies to correctly report claims filled with 340B stock for 340B-eligible clients to ensure the state does not collect rebates for these drugs.

Clinician-Administered Drug Rebates Exclusions

HHSC only excludes medical claims for outpatient clinician-administered drug claims from the rebate collection process if the provider submits the U8 modifier. It is the responsibility of the provider to correctly report claims identified as 340B stock for 340B-eligible clients to ensure the state does not collect rebates for these drugs.

340B Responsibilities

Covered entities and contracted pharmacies are responsible for the following:

  • Correctly reporting claims filled with 340B purchased drugs for 340B-eligible clients to ensure CMS does not collect rebates for these drugs
  • Cooperating with drug manufacturers to resolve disputes when either traditional or managed care claims are not labeled appropriately with SCC 20 or U8 modifiers and HHSC invoices for rebates MCOs and pharmacy benefit managers
  • Retaining all necessary data, including the submission clarification code 20 or U8 modifier in the encounter data sent to HHSC
  • Maintaining their shared-savings model

It is not the responsibility of the MCO to oversee covered entities or for the contracted pharmacies to ensure HHSC does not collect rebates. If the appropriate values are submitted, then it is the responsibility of the MCO to transmit those fields from the covered entities or pharmacy.

The HHSC drug rebate system relies on the correctly submitted values to identify claims excluded from the rebate invoicing process. HHSC does not approve alternative arrangements for preventing duplicate discounts.