340B Providers

About the 340B Program

Section 340B of the Public Health Services Act requires drug manufacturers to provide outpatient drugs to Health Resources Services Administration (HRSA) eligible healthcare organizations, or covered entities, at significantly reduced prices. This program enables covered entities to purchase drugs at discounted prices and use the remaining funds to provide comprehensive services to eligible people. This policy also allows insurers, including Medicaid, to share in the savings generated by the 340B Program.

Pharmacy Provider Enrollment

Texas Medicaid requires applicants to indicate their sources for pharmaceutical products. During the application process, covered entities participating in the 340B Program must identify whether the entity is eligible to purchase products through the 340B program. Covered entities should contract with the health plan or PBM to participate as a 340B provider in managed care. Pharmacies enroll using the Texas Medicaid and Healthcare Partnership (TMHP) Provider Enrollment and Management System (PEMS). Refer to the Provider Enrollment section of tmhp.com for instructions.

Claim Submission and Rebate Processing

Pharmacy Claims

  • Pharmacies participating in the 340B Program must identify outpatient pharmacy claims filled with 340B stock for 340B-eligible people by submitting a value of “2Ø” in the “Submission Clarification Code” field (420-DK). Pharmacy staff must also follow any additional rules related to 340B drugs stipulated in contracts with managed care health plans or pharmacy benefit managers.
  • Claims are only excluded from the drug rebate system invoicing process when submitted with this value.

Medical Claims

  • Providers are required to include the correct 11-digit NDC for all claims with drug-related HCPCS procedure codes. Providers must utilize the Texas NDC-to-HCPCS Crosswalk as a resource to identify payable procedure codes and their associated NDC combinations. 340B covered entities submitting claims on the 837I and 837P are required to submit the modifier value "U8" as the first value in the modifier field (Loop 2430, Segment SVD03-03) when 340B stock was administered in situations complying with HRSA's program rules.
  • Claims are only excluded from the drug rebate system invoicing process when submitted with this value.


  • Covered entities/contracted pharmacies:
    • Correctly reporting claims filled with 340B stock for 340B-eligible patients to ensure rebates are not collected for these drugs
    • Working with the drug manufacturer to resolve disputes when either traditional or managed care claims are not indicated appropriately with SCC “20” or “U8” modifiers and HHSC invoices for rebates
  • Health plans and pharmacy benefit managers:
    • Maintain shared-savings model
    • Passing the submission clarification code “20” or “U8” modifier in encounter data to HHSC
    • It is not their responsibility to oversee covered entities or the contracted pharmacy to ensure rebates are not collected.
  • HHSC does not approve alternative arrangements for preventing duplicate discounts. The automated drug rebate system relies on the submitted code or modifier to identify claims excluded from the rebate invoicing process. Covered entities are encouraged to provide the Texas Medicaid 340B Procedures (PDF) to HRSA auditors.