Colorado's and Mississippi's Medicaid programs have ordered hospitals to report which medications they receive 340B discounts for, marking the latest effort to curb state drug spending.
Currently, many states don't know what hospitals are paying for drugs after rebates, which may inflate state government drug spending under Medicaid. The information would allow them to adjust reimbursements or determine which drugs weren't discounted so the state can seek drugmaker rebates.
Hospitals in the states have until Nov. 1 to give Colorado and Mississippi the 340B information, and their drug claims could be denied if they fail to comply with the requirement.
In Mississippi, providers must identify 340B-purchased drugs on medical and retail pharmacy claims submitted to the state for Medicaid payment. Colorado's notice targets retail pharmacies at hospitals, which need to indicate if they provide only 340B-purchased drugs or no 340B-purchased drugs to Medicaid enrollees. They must choose one or the other.
If hospitals choose to supply 340B drugs in their retail pharmacies, they must submit the 340B acquisition cost data to the state.
States across the country have been issuing similar notices at the CMS' urging, according to Maureen Testoni, interim president and CEO of the hospital trade group 340B Health.
"What CMS has been trying to do is get states to reduce how much Medicaid is paying out for drugs," Testoni said.
At least 26 other states including California, Texas and Florida have drafted and submitted state plan amendments to the CMS that will allow them to better gauge which medications hospitals are purchasing under the 340B program and their acquisition costs, according to a roundup by Simon&Co., a health policy firm.
Federal law prohibits states from claiming rebates on drugs that were already discounted under the 340B program.
States must register with HHS' Health Resources and Services Administration (HRSA) as 340B entities, and Mississippi officials assumed that any drugs these hospitals were billing were purchased via the federal drug discount program, according to Matt Westerfield, spokesman for Mississippi's Division of Medicaid.
"We automatically did not collect a rebate," Westerfield said. "Recognizing that substantial amounts of rebates were not being collected, CMS instructed states to modify their systems to identify which drugs were purchased with the 340B discount and which were not."
In fiscal year 2015, the last year for which data are available, Medicaid spent approximately $53 billion on drugs, but was able to get $24 billion in rebates bringing actual spending down to $29 billion, according to federal statistics. That's up from the prior fiscal year 2014, during which Medicaid spent approximately $42 billion on prescription drugs and collected about $20 billion in rebates, for net drug spending of $22 billion, according to federal data.
Enrollment in the program has only grown in recent years, hitting 72 million in 2016, up from just over 65 million people in 2014.
Complying with the notice from Mississippi will be easier since the CMS required a similar modifier for Medicare claims, according to Jillian Foster, system administrator of pharmacy of Baptist Memorial Health, which collectively has 21 hospitals in Mississippi, Tennessee and Arkansas.
The CMS outlined the mandate in the 2018 outpatient pay rule, which went into effect Jan.1. Baptist Memorial was able to work with its EHR vendor Epic to expand the identifying capability to Medicaid claims.
However, the process could have been simpler if the CMS worked closer with states.
"The thing that would have been helpful is if the same modifier could be used for both Medicare and Medicaid," Foster said.
As each state Medicaid agency begins to issue similar notices, each will have different modifiers, she said.
The CMS also pushed for greater clarity on the use of 340B in Medicaid so that it can ensure it's reimbursing based on actual acquisition costs for a drug, Testoni said.
Colorado's request is based on a 2016 rule from the CMS that states require retail pharmacies to ensure drugs are reimbursed on actual acquisition cost, according to Greg Doggett, vice president of legal and policy counsel for 340B Health.
States were giving extensive flexibility to implement the rule which is why some states are just now rolling out guidelines, he said.
It's unclear how much money Medicaid may save since data are scarce on how often states paid hospitals more than acquisition costs and how vast the difference between the two price points were, according to Testoni.
