State Medicaid Agencies Are Implementing Harmful 340B Drug Billing and Reimbursement Changes

By | Published On: June 8, 2017

All clients participating in the 340B Discount Drug Program (340B program) should watch carefully for state changes to Medicaid reimbursement for drugs. In 2016, the Centers for Medicare and Medicaid Services (CMS) published two rules that are leading to major negative impacts on safety net providers (called “covered entities”) participating in the 340B program.  In February 2016, CMS finalized a major overhaul of the rules governing how state Medicaid agencies reimburse covered entities for “covered outpatient drugs” (CODs) – drugs, biologics, and insulin that are provided on an outpatient basis and separately reimbursed by Medicaid.[1]  In May 2016, CMS issued a comprehensive set of regulations regarding Medicaid managed care organizations (MCOs) that clarified that state Medicaid agencies and their MCOs are responsible for ensuring that no 340B claims relating to drugs billed to MCOs are included in Medicaid Drug Rebate Program (MDRP) requests.

In the course of implementing those changes, many state Medicaid agencies are taking unnecessary, and sometimes illegal, steps that go beyond CMS’ requirements and harm covered entities.  Covered entities and other 340B program stakeholders need to identify their Medicaid agency’s approach to 340B drug reimbursement to determine whether the methods used are improper or unduly onerous.  In particular, be on the lookout for:

  • Rules that mandate that 340B drugs are not used when the covered entity or its contract pharmacy bills Medicaid;
  • Any requirement that MCOs pay covered entities or their contract pharmacies no more than a certain amount;
  • Contracts between state Medicaid agencies and MCOs that direct the MCO not to cover 340B drugs altogether or in certain settings;
  • Sudden changes without prior notice or an opportunity to comment; or
  • 340B claims identification or billing requirements that are impossible to follow.

If you see any changes like the above being pursued in your state, please contact Michael Glomb at or the Feldesman Tucker attorney with whom you typically work. To request a copy of the more detailed memorandum that describes the CMS rules and improper responses that we have seen, contact FTLF’s Director of Training & Technical Assistance, the training team at

[1] See 42 U.S.C. § 1396r-8(k)(2) and (3).

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