the accuracy of the Medicaid Exclusion File. 86 The ACA also directed HRSA
to develop “more detailed guidance describing methodologies and options
available to covered entities for billing covered outpatient drugs to State
Medicaid agencies in a manner that avoids duplicate discounts,” 87 but such
guidance is still pending.
A concern for community health centers is whether dispensing 340B drugs
to Medicaid Managed Care Organization (MCO) patients, rather than
Medicaid fee-for-service patients, risks a duplicate discount. Billing a
Medicaid MCO at market rates for a 340B drug dispensed to a Medicaid
MCO enrollee does not appear to create a duplicate discount under Section
340B. 88 At the time the methodology for preventing duplicate discounts was
published, manufacturers were not required to pay states a rebate on drugs
dispensed to Medicaid MCO enrollees. That changed with the enactment of
the ACA, which extended the manufacturers’ rebate obligation to covered
outpatient drugs dispensed to individuals enrolled in a Medicaid MCO if the
Medicaid MCO is responsible for coverage of such drugs. 89 However, the
ACA further amended Section 1927 of the Social Security Act to expressly
exclude Section 340B drugs from the rebate obligation. 90 In short, since
340B drugs dispensed to Medicaid MCO enrollees are specifically exempt
from the rebate requirement, it is arguably impossible for a covered entity to
violate Section 340B by submitting a claim to a Medicaid MCO for payment
of 340B drugs.
With respect to Medicaid fee-for-service drugs, the current HRSA
pharmacy contract guidelines prohibit the use of a contract pharmacy to
dispense to Medicaid beneficiaries unless that state’s Medicaid agency and
the pharmacy have developed a methodology to prevent duplicate discounts.
Effectively, for a contract pharmacy to dispense 340B drugs to Medicaid
patients, the pharmacy and state Medicaid agency must agree on a way to
determine which of the contract pharmacy’s Medicaid claims were filled with
340B drugs (on behalf of the contracting covered entity) and which were not
so the state may claim a rebate for the latter. Because coordinating such an
effort is a heavy lift, most contract pharmacies opt out of providing 340B
drugs to Medicaid patients altogether.
The Medicaid Exclusion File – the mechanism that HRSA established to
86. § 256b(a)( 7)(E).
87. § 256b(d)( 2)( B)(iii).
88. See § 256b(a)( 5)( A)( i) (“ A covered entity shall not request payment under Title XIX
of the Social Security Act [Medicaid] for medical assistance described in section 1905(a)( 12)
of such Act with respect to a drug that is subject to an agreement under this section if the drug
is subject to the payment of a rebate to the State under section 1927 of such Act.”).
89. 42 U.S. C. § 1396r- 8(b)( 1) (2008).
90. See id. (stating that a rebate agreement is required “for covered outpatient drugs of